 Two Cape Town apartments recently went viral for their overpriced monthly rent. A modest apartment in Green Point was going for R22,000 while another small unit in Durbanville was advertised at R16,000, despite needing repairs and having an ‘ugly kitchen’ with broken appliances. Social media users criticised the price-quality mismatch, noting that similar or better homes in Joburg cost far less.
Affordability concerns like these are a key reason why tenants are relocating from the Western Cape, according to nearly 80% of rental agents in PayProp’s 2025 State of the Rental Industry report. “Even more concerning, the vast majority of South African households (80%) are priced out of the formal housing market because their monthly income is under R26,000,” says Renier Kriek, MD of innovative home finance business Sentinel Homes. “We have an undersupply of about three million formal housing units.” Living in Cape Town is particularly pricey, with average property sale prices increasing from R1.6 million in 2020 to R2.1 million in 2025. In contrast, Johannesburg’s prices have remained relatively flat over this period, staying on average between R1 million and R1.5 million, according to property analytics firm Lightstone. Soaring rent “Obviously the higher capital values mean that people who buy for investment require a higher nominal return, which means the rents go up,” says Kriek. This has been happening in the Western Cape, where the PayProp Rental Index shows 9.6% year-on-year rental growth and average monthly rents reaching R11,285 in Q1/2025 – significantly higher than Gauteng (R9201), KwaZulu-Natal (R9170) and the Eastern Cape (R7330). Rent control Calls for rent control in Cape Town are getting louder. The idea is to cap rent increases to make housing more affordable. However, this may win populist votes and provide short-term relief for tenants, but won’t fix the housing shortfall, says Kriek, pointing to unsuccessful rent control in cities like New York, Berlin, Stockholm or Tokyo. While rent control impacts the entire property market, it ironically hits hardest in the low-income band – those who should benefit the most. “Rent control leads to underinvestment and poorly maintained units as landlords have limited incentives to maintain or expand their rental stocks because their profits are capped,” says Kriek. Another problem is misallocation, where some tenants will stay in rent-controlled units even when these no longer match their needs. By blocking the units for people who genuinely need them, they create an inefficient housing distribution that worsens the undersupply further. “Rent control is the most efficient technique currently known to destroy a city - short of bombing.” Making small units profitable There’s ample private sector money available to invest in rental housing, says Kriek but government needs to change the market design that makes this segment unprofitable. Small units are more expensive per square metre to build – and sell – than larger ones. In addition, he says, tenants in affordable units (sub-R7000 rent/month) are more frequently in rent arrears than higher-income tenants as they feel economic pressure harder. The number of ‘squatting’ tenants (who haven’t paid rent for three consecutive months and are still occupying the property in the fourth month) is also increasing: the TPN Squat Index rose from 3.48% in Q4/2023 to 3.71% in Q2/2024. Legal protection of landlords The balance of power is unduly tipped against landlords and needs to be levelled, says Kriek. “The law that governs evictions, the Prevention of Illegal Eviction and Unlawful Occupation of Land Act (PAI), isn’t fit for purpose. It was designed to evict land squatters but due to poor drafting it also applies to the eviction of tenants who don’t pay their rent or refuse to move out when legally required.” This makes the process unnecessarily expensive, time-consuming and open to exploitation. “Historically, eviction is sensitive topic in SA,” concludes Kriek. “But if we don’t allow strict enforcement of payment obligations, then landlords won’t invest in rental housing, which is the easiest and the quickest way, using the least amount of government resources, to fix our housing undersupply.” ENDS
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 In its June 2025 Property Newsletter, automotive and property data provider Lightstone reports that only one formal house exists per 3.3 families who earn less than R26,000 per month. This accounts for more than 80% of South African households. The overwhelming majority of South African households are currently priced out of the South African property market, and this trend is worsening.
“There’s something very wrong if such a large demand is not being met and, although the problem is well known in the property industry, no real solutions are forthcoming from the government actors who are responsible for solving these problems,” says Renier Kriek, Managing Director of innovative home finance provider, Sentinel Homes. He says the root causes are mainly systemic and need to be addressed by the government. It is simply not acceptable that since 2000 we have added 19.3 million inhabitants in SA but our economy has managed to produce only 1.9 million homes. Where we are Not only are there not enough houses but new developments are victim to rising construction costs, making each generation of property less affordable to consumers than previously. In fact, property prices have been outpacing wage increases for the past 70 years, not only in SA but in most of the world. Add to this trend South Africa’s flaccid economic growth resulting in low job creation and low wage growth, and it’s easy to see why affording a home is becoming harder and harder for low to middle earners. National changes Certain things need to change outside the property market before problems can be tackled from within, says Kriek.
“Making such changes at a national level will ensure that problems in the property market are not intractable,” says Kriek. “But these necessary reforms will also go a long way toward rejigging the economy generally for the better.” Property market changes Inside the property market, several problems are making housing construction more costly and therefore less affordable when properties are sold.
Opening the door to housing that’s affordable If 80% of South Africans cannot afford a home, and developers are unwilling to meet the demand, something is terribly wrong. It’s not an innovation or economical problem but a systemic one that the government needs to rectify. The problem is market design, and that is something for which we rely on government, and for which the political will must exist to take some tough decisions. “The private sector is profit driven and the demand clearly exists, so it’s up to the government to create the incentives and ease the restrictions that prevents the private sector from earning their bread in the provision of affordable housing,” says Kriek. “There’s more than enough money floating around – government just needs to create a market that provides incentives for the available resources to flow to where the demand already exists.”  Frequent short-term borrowing could be a black mark against you when applying for a home loan.
“The number of short-term loans you burn through may warn banks or other lenders that you’re having trouble managing your finances,” says Renier Kriek, Managing Director at disruptive home finance business, Sentinel Homes. That can make them reluctant to fund your dream of owning your own property. Easy debt While all debt should be managed responsibly to maintain a good credit score, for many South Africans, short-term loans are becoming an addictive way to make ends meet. Or, to fund luxuries they can’t afford but refuse to live without. It’s tantalisingly easy to get hooked as well - you don’t need to put up collateral to get one and you don’t have to explain what you’ll use the money for. Also, some like to think that if they fall behind on their repayments, they can simply submit themselves to a debt review. Introduced by the National Credit Act, a debt review is a legal process for someone who is over-indebted to settle with their creditors by paying what they can afford. A registered debt counsellor will review their finances and help them create a repayment plan. The hidden costs Unfortunately, there’s no such thing as a free lunch. Short-term loans can carry much higher interest rates than other types of debt - up to 5% per month, which is around 6 times the current prime rate. “So, the more you borrow, the worse off you become financially and the more likely you are to default,” says Kriek. That debt review “solution” you are being offered isn’t necessarily a safe bet either - because it will cut you off from any further credit provision for as long as it takes to remedy your past bad behaviour. Even if you’re not a repeat offender, firms offering debt counselling will often assure you that your debts will be forgiven, the slate is wiped clean and all will be forgiven. “In the real world, lenders could deny your home loan application simply because you needed debt review in the first place,” says Kriek. Alarm bells Short-term or unsecured loans are not an evil to be avoided entirely. They’re actually good for the economy when used responsibly. However, they’re also a red flag to home loan providers when they feature strongly in your financial history, even if you’re keeping up with repayments. Credit providers use various risk models to identify patterns in our spending behaviour - good and bad. They know what financially responsible and irresponsible spending patterns look like. “Frequent short-term loans - with or without defaulting - are a risky pattern that implies an individual does not manage debt well, and that is something a home loan provider does not want to make a long-term investment in,” says Kriek. “The ability to delay gratification is the underlying attribute that responsible users of credit have, but there is no easy way to quantify whether a particular applicant possesses that trait – the number, frequency and type of unsecured credit transactions is a useful proxy in that regard.” Good debt So, what is the right course of action, especially if you already have short-term loans? First, understand that short-term loans have their place but are seldom necessary. Stop using them and make a plan to pay off the ones you already have. Then get to work on building an emergency fund of cash that can only be touched for true emergencies, so that you will not need unsecured debt in those cases. Second, work on saving for luxuries such as holidays and large capital purchases. You will be paying monthly anyway, whether you take the credit or save, but in the saving scenario interest will be working in your favour rather than against you. Delaying the gratification of that large purchase is difficult, but no-one said adulting would be easy. Finally, if there is no other option, opt for “good” debt as far as possible. Buy your clothes, furniture, appliances, groceries and other items using store credit if you absolutely cannot do without. You don’t have to buy things you don’t need to build a good credit score. Everyday items and normal household purchases are fine. “Credit providers’ risk algorithms generally look favorably on consumers who start their credit journey with store debt because it fits the pattern of responsible spending, provided you pay your accounts on time, of course, and do not spend near or above your credit limit,” says Kriek. Long-term planning Eventually, most people end up before a home loan provider in the hope of buying a house they love. But lenders are profit makers and risk reducers, so it’s important to think like they do. Are you a good investment? Will you repay your home loan on time and in full? The lender’s modern analytical systems - often powered now by artificial intelligence - evolved to answer questions like these and exist to protect their owner from risk. “Short-term loans that literally fund your lifestyle can easily sway the algorithm against you,” says Kriek, “especially if you are funding luxuries or nice-to-haves from easy debt rather than developing the discipline of saving.” ENDS  Recently, the South African Reserve Bank reduced the repo rate by 25 basis points but the real interest rate remains far too high to spur meaningful capital investment by South Africa’s private sector. While the news brings some welcome relief to property owners, it’s another disappointment for the country’s real economy.
This is according to Renier Kriek, Managing Director at Sentinel Homes. “The SARB has consistently preached that their policy bible contains only one chapter, titled ‘inflation targeting’, which requires sticking to within their 3–6% inflation target band and anchoring inflation expectations at the 4.5% midpoint,” he says. “Their messaging has consistently and unfailingly pledged that their mandate is the only consideration that guides their decisions.” False policy Yet, inflation has remained low over an extended period, currently sitting at 2.8%, leaving the opportunity for a softening of monetary policy wide open. Why then has the SARB stubbornly refused to reduce the interest rate accordingly, even as inflation hovers at or below the bottom of their target band? Despite preaching vague and opaque ‘risks to the upside’ to justify their hawkishness in recent years, it’s clear that the SARB has been disingenuous – in short, they have been lying to us. That was made plain for the first time today, but it has long been evident there is a secret driver of their decisions. “It was clear with the announcement that the SARB’s policy bible has contained a new chapter, which is their anticipated future mandate, and they have already been guided by that expanded gospel, despite the existence of the chapter having been secret and further despite the content of the chapter not having been agreed to with Treasury and other stakeholders,” says Kriek. Why now? The argument advanced by the Monetary Policy Committee, by way of Governor Kganyago’s statement and answers to questions during the press conference, is that the MPC wishes to deal a decisive blow to inflation in the long term, transforming the SA economy to a low(er) inflation economy. This will also mean lower interest rates for longer in future, per the MPC’s reasoning, since lower inflation economies generally tend to have lower inflation rates. “However, the question is why do we want to do this now?” says Kriek. “Moving to a lower inflation target will likely have long-term positive consequences for the SA economy, but it will also involve near-dated discomfort. Essentially, the MPC is promising short-term pain for long-term gain.” “The SA economy is a very frail patient at the moment and keeping interest rates at current high levels in order to achieve longer-term outcomes is a risky gambit. We should at least be asking, and this is as much about political calculation as economic policy, whether we should not attempt monetary stimulus first, getting the economy out of its bandages, and attempt the MPC’s incisive reforms once the patient is back on its feet.” Impact of delinquency The property sector has shown signs of broad-based recovery, with price lines across all the metros trending upwards in Stats SA’s latest Residential Property Price Index. The cumulative 75 bps cuts, with a further cut at today’s meeting, have already had the effect of bringing previously pent-up demand spilling into the residential property market. However, while these are green shoots, the market is still under significant strain. According to National Credit Regulator statistics, home loan delinquency is up 35% in the last 3 years, signifying the tremendous pressure households are experiencing related to their finances. “This sharp increase in delinquency will come home to roost soon, as a sudden influx of distressed stock in the market is likely to drive prices down in the face of relatively tepid demand,” says Kriek. A small window of opportunity Households seeking to enter the market should not delay any further. The MPC found that a neutral policy should be 25 bps lower than the new repo rate of 7.25%, meaning we can expect at least one more cut in the near future. So, it is more likely than not that the upwards momentum evidenced by the aforementioned green shoots will be sustained and expanded as the market adjusts to lower rates. The decision at the next meeting will be led by the MPC’s insistence on pre-emptive management of monetary policy through its anticipated new mandate, and so the CPI inflation reports from now until the next meeting in July 2025 will have to be watched closely. “It seems that if inflation inches higher even slightly, the MPC’s overly hawkish instincts will rule decision-making at the next meeting, favouring keeping rates steady despite low employment and flaccid economic growth,” says Kriek. ENDS  Nothing is certain except death and taxes, the saying goes. Property owners must plan for both if they want their home and other assets to pass smoothly to those surviving them.
“Structuring your estate smartly, or at least having a will in place, will spare those grieving your passing further hardship, both emotional and financial,” says Renier Kriek, Managing Director at Sentinel Homes. Any decision a property holder makes in this regard should be guided by advice from a professionally qualified financial and estate advisor. However, Kriek offers a good overview. Basic factors When planning for death, property owners need to consider two main factors. The first is how to structure their estate so they don’t directly own anything when they die. This is usually only appropriate for those with large estates and minor dependents, or businesspeople who risk having their assets attached to repay creditors, but may not be the best tax planning advice for most consumers. The second concern is their marital status. Are they single, married in community of property, or married out of community of property either with or without accrual? “Each marriage model will affect the distribution of an estate differently,” says Kriek. Make a will Without a will, intestate rules apply to the deceased estate, as prescribed by the Intestate Succession Act 81 of 1987. These rules determine which surviving relatives will inherit what portion of the estate, from the surviving spouse and descendents down to distant blood relatives. The Act’s complex requirements could result in, for example, a spouse losing their family home to ensure they and each child receives an equal inheritance. So, for anyone having assets such as homes or other fixed property and especially those property owners who have dependents, it is always best to have a will professionally drawn up to make sure assets will be distributed in a manner desired by the property owner. “Again, the marriage model will affect how the will should be structured,” says Kriek. “Estate planning with a licensed and regulated professional is also likely to include investments and insurance, proper planning of which remain essential.” Leverage trusts and companies The beginning of the article mentioned not owning property at death, which is a desired outcome for some consumers due to tax, risk or other reasons. Avoiding direct property ownership while still enjoying the benefit of owning property can be accomplished through the use of a trust or company. However, the cost of these vehicles makes them best suited to more affluent people who have larger estates and minor dependents, or entrepreneurs. If property is transferred to or bought through one of these entities, the entity owns the asset. So, dying is of no consequence, if one’s dependents are the ultimate beneficial owners of the entity, such as through being beneficiaries of a trust. The property held by a trust or company rather than in a person’s own name will not be subject to estate tax or capital gains tax at death, and typically cannot be attached by the deceased’s creditors. Only income that is earned through that property is taxed at a rate prescribed for the specific type of entity in addition to capital gains tax if the entity elects to sell the property concerned. “Which structure is best suited to an individual’s needs must be determined with the help of a trusted estate planner or financial manager,” says Kriek. “Do not assume that the more complicated structure, using entities such as trusts and companies, is the “better” and therefore most appropriate one.” Address affordability Unfortunately, structuring cannot save a property that surviving family members are unable to afford, whether it is bond repayments, rates or levies, trust administration fees, corporate accounting fees, or other expenses. This could happen if a surviving spouse does not work and cannot raise the required finances to settle existing debt against the family home or other property. An estate might be able to cover its own costs, for example, where income is derived from rental properties or the entity receives cash bequests from the deceased person. Otherwise, a will, trust or company should be backed by some form of insurance that ensures funds are available after the owner’s death. “By following this rough guide and using a properly qualified and licensed financial planner, you will allow your loved ones to continue enjoying the life you worked so hard to provide them with,” says Kriek. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, [email protected], 060 995 6277, www.atthatpoint.co.za For more information on Sentinel Homes please visit: Website: www.sentinelhomes.co.za Facebook: Sentinel Homes  Competing precedents, including a recent court case involving a home buyer who got cold feet, wanted to walk away from the deal but couldn’t, have sparked discussions in South Africa’s property law circles. The judge ruled in favor of the seller, because both parties had signed a contract that became binding as soon as the buyer’s credit provider issued its “approval in principle”.
“Some people misinterpreted the ruling, or disagree with it - saying it wasn’t fair,” says Renier Kriek, MD of Sentinel Homes. Yet the judgement followed centuries of contract law precedent by focusing only on the following question: At what stage did the purchase agreement become binding, before or after the property finance had been accepted by the buyer? “Obtaining finance is a process, unlike a turning on a light switch, it’s not instant and even positive results arrive piecemeal,” says Kriek. “When you sign an offer to purchase a property and require a home loan, there’s usually a condition that your loan must be approved before a certain date. This is called “suspensive condition” – meaning that only once this condition is fulfilled, the contract will become final and binding. “Buyers and sellers need to understand the suspensive condition in their contract, especially as they generally have competing interests in terms of what stage the deal should become final,” he says. “It’s therefore important to phrase your contract without ambiguity, so it’s not open to misinterpretation.” Real-life consequences Contract law may sound academic, but it has serious, real-life consequences. Since nobody wants to lose their deposit, Kriek urges buyers to fully grasp the financing process: When a home loan provider assesses your application to buy a house, and is satisfied lending you the money, it will first issue an approval in principle (AIP). Then it conducts a valuation, before eventually issuing a prescribed document called pre-agreement statement and quotation. According to the NCA, the buyer has five days to accept the pre-agreement statement and quotation, which then becomes a final offer of finance. “From the seller’s perspective, it would be best if the agreement of sale would likely contain a clause stating that the contract becomes binding as soon as the home loan provider issues the AIP,” says Kriek. “From the buyer’s perspective, however, this clause poses a risk: it means you’re bound to the sales agreement, the sale is final, and your deposit could be on the line, even before you have agreed to the interest rate and other finance conditions suggested by the home loan provider.” Ideally, he advises buyers to ensure the sale is only binding once: a) the bank has issued the pre-agreement statement and quotation, and b) you have accepted it. “This means you can only lose your deposit or be forced to buy the property once you have agreed to the terms of the credit proposed to you.” Check the nitty-gritty Also watch out for home loan approvals that require the submission of approved building plans. As a rule, your offer to purchase should require the seller to do so. But if this clause is missing, the seller won’t be obliged to provide the building plans, even if your home loan provider requires these. This makes you as the buyer responsible for obtaining the plans. It’s not only time-consuming but if plans can’t be approved, due to unauthorised building works, your deposit may once again be at risk. This also applies to any other conditions your home loan provider may have. You have to ensure that these conditions are also in the sale agreement, so that the two documents tie into each other. For these reasons, Kriek urges buyers to get legal advice before signing their offer to purchase. Don’t rely only on the property practitioner or others linked to the seller No-one should take a high cost and high liability decision like buying a home without expert legal and other professional advice, such as from a registered property practitioner and bond originator. Ultimately, understanding the nitty-gritty of your contract should help you avoid financial losses and enjoy a smoother property transfer. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, [email protected], 060 995 6277, www.atthatpoint.co.za For more information on Sentinel Homes please visit: Website: www.sentinelhomes.co.za Facebook: Sentinel Homes  South Africa has a housing supply backlog of at least 2.2 million units, with a significant shortage in the affordable housing or “gap market”, according to a recent study by the Centre for Affordable Housing Finance (CAHF).
The gap housing market is generally considered to be households earning too much to qualify for Reconstruction and Development Programme (RDP) housing but too little to obtain traditional bank-financed homes in the open market. Renier Kriek, MD at Sentinel Homes, says 40% of consumers fall into the RDP housing category (household incomes below R3 500 per month) and the wealthiest 30% of households are well-served by the open housing market. Massive demand The gap market is the middle 30% of consumers where the supply of housing stock is extremely low and even declining despite massive demand. Kriek argues that a market design error is to blame for this high demand going unmet. Adverse market design disincentivises the holders of capital to invest in affordable housing. The biggest hurdle relates to the unnecessary prolix, cumbersome, and expensive processes that are associated with evictions and foreclosures. The cost of resetting the transaction (evict or foreclose) is prohibitive in South Africa and does not match market circumstances. South Africa should adjust their regulatory environment to favour private sector investment and the expansion of supply. “We need to reduce the transaction cost for the holders of capital to take their chances on consumers who are not acceptable risks in the unduly high tenure security environment. In this way, some people will move into the formal housing market and fall out again, and perhaps more than once in their lifetime. If we go through enough of these cycles eventually everyone will be housed.” Kriek admits that this solution may sound slightly callous and counterintuitive to the casual listener. “The alternative, retaining our restrictive policy environment, is even more callous and is currently barring people from ever getting the opportunity to enter the formal housing market. What use is being born free if you will never realise that constitutionally mandated right of access to adequate housing?” Unintended consequences Another prevalent and reasonably fixable market design problem relates to government subsidies. The Department of Human Settlements has been offering the First Home Finance (FHF) subsidy, previously called FliSP to households in the gap housing market. It aims to subsidize affordable first-time home-ownership opportunities for households with income from R3 501 up to R22 000 per month. It is an inverse means-tested subsidy, meaning that the cash grant is lower the higher the household income becomes. “Millions of rands earmarked for this subsidy have remained unclaimed in the past and continue to remain unclaimed. This is not because people do not know about the incentive or do not desire it. The first challenge is the relative scarcity of gap housing stock, which is driven by poor demand due to incentives that are adverse to the deployment of capital in this segment, whether by landlords or home loan providers.” Kriek argues that the subsidy design has unintended consequences resulting in market participants, such as estate agents, being unwilling to sell to subsidy recipients. “Due to overzealous fraud prevention measures and perhaps also an unwillingness to integrate into the existing market infrastructure, government has traditionally insisted that the registered title deed contains the name of the subsidy recipient before they release the subsidy amount.” This means that the subsidy portion is usually received months after the transfer, unlike all other funds in a property transaction which are secured by third party payment functionaries such as banks or attorneys. This makes each property transfer involving a subsidy inordinately complex, and everyone involved prefers doing the same transaction with a consumer who does not rely on a subsidy. Usually, it’s the estate agent waiting for the subsidy payment to receive their commission, and that is simply an unacceptable adverse incentive if government’s intention is to have the subsidy reach its intended recipients.” Though recent developments seem to favour fixing the market design shortcomings of FHF, the administration of the subsidy remains positively byzantine. There is a national subsidy authority, that can approve and pay subsidies, and a separate subsidy authority for each of the provinces, each with a unique set of rules and procedures and a separate application procedure. This is a quagmire for lower income consumers to navigate successfully, especially where those who rely on subsidies are already viewed negatively by market intermediaries such as estate agents and transferring attorneys. It will take significant political capital to implement market design solutions that can solve the problems facing the gap housing market. If we do nothing it may even get worse, says Kriek, who fears that the current government may not have the ability to adequately diagnose the problem, and much less the political will to affect the necessary policy and regulatory changes. However, if it could succeed, the job creation that could follow finding solutions to the problem of housing supply could go a long way toward achieving the job creation efforts of government recently articulated in the President’s State of the Nation address to parliament. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, [email protected], 060 995 6277, www.atthatpoint.co.za For more information on Sentinel Homes please visit: Website: www.sentinelhomes.co.za  Overregulation of the housing market in South Africa is discouraging the private sector from investing in formal low-cost housing projects.
This is according to Renier Kriek, Managing Director at Sentinel Homes. "With government resources being limited and corruption widespread, it is imperative that private capital is enticed to join the constitutional project of granting all South Africans access to adequate housing," he says. It is apparent that, for all the government's initiatives, programmes and subsidies to provide RDP housing, a vast number of underprivileged citizens still reside in informal settlements. However, while tax breaks exist for new or improved rental housing, with added incentives for low-cost housing, the rest of the legal and policy landscape is much less persuasive to investors. Mortgage risk For one, housing consumers who earn less than R15,000.00 per month make up less than 0.6 percent in value and 1.7 percent in number of accounts granted mortgages in Q1 2023, matching a decade long trend. This is because banks tend to avoid these riskier applicants, even when supported by the government's Finance-Linked Subsidy Programme (FLISP). The reason is simple: the excessively long and inefficient foreclosure process in South Africa seems bent on ensuring losses for both banks and defaulting consumers. In addition, judges are often overly sympathetic to defaulting debtors per case, not considering the overall negative effect this has on banks' attitude towards financing the larger underprivileged community. "However, if the cost of terminating defaulting mortgages were low, banks would be less risk averse, thereby increasing the likelihood of access by this segment," says Kriek. Rental risk Similar to mortgages, the time and financial costs of eviction are too high, and the law and courts too lenient on defaulting renters. With the supply of formal housing being so low, the cost of eviction should also be low and the rights of a large number of potential tenants should weigh more heavily than those of a few non-paying tenants. "If the risk was low, more landlords would emerge to invest in satisfying the obvious demand for affordable accommodation," says Kriek. Development rules Lastly, housing development in South Africa is inhibited by long or delayed regulatory processes, as well as building standards designed around first-world circumstances. This is further exacerbated by municipal inefficiency, which affects delivery of essential services like roads, water, power and sanitation. Authorities have also suddenly become deeply concerned with the lack of affordable housing. Their response has been to request that developers include affordable housing units in new developments, even in areas not marked for such housing. "While laudable at first glance, this does not increase the availability of affordable housing as beneficiaries will often flip the unit at market price to realise a profit," says Kriek. The positive intent is therefore negated and leaves the market worse off. Change Is Needed Mortgage risk, rental risk and misguided development rules, taken together, disincentivise the development of low-cost housing in favour of larger, pricier units. "Given the state of the country’s housing market, urgent legal reforms and business-friendly policies are needed to ensure all South Africans gain access to constitutionally mandated housing," says Kriek. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, [email protected], 060 995 6277, www.atthatpoint.co.za For more information on Sentinel Homes please visit: Website: www.sentinelhomes.co.za Facebook: Sentinel Home  South Africans who have been hesitating to buy a new home due to high interest rates may finally be able to take the plunge.
"For the first time since April 2022, the Consumer Price Index (CPI) has fallen back within the Reserve Bank’s target band of between 3-6 percent," says Renier Kriek, Managing Director at Sentinel Homes. According to Kriek, a lower CPI indicates that inflation has potentially peaked. This will likely mean stabilization of the market interest rates and a repo rate reduction could even be on the way. Signs that inflation is falling Since the disruption to world economies caused by COVID-19, several factors subsequently contributed to high global inflation, from which South Africa was not spared. Inflation often occurs because the difference between consumer demand for items and producers' ability to supply them causes their prices to increase too sharply to remain affordable. It may also result from a drop in the relative purchasing value of money due to various economic factors. Inflation in South Africa is measured through the Consumer Price Index (CPI) compiled by Stats SA. The South African Reserve Bank (SARB) follows a policy of keeping any changes in the CPI within a range of 3 to 6 percent year-on-year, preferring to keep it anchored at 5 percent. Even before local CPI breached 6 percent earlier last year, SARB moved to reign in inflation with 10 consecutive increases in the repo rate, to the current level of 8.25 percent. Interest rates consumers are charged on their debt, such as the prime rate, are linked to the repo rate. This means that rises in the repo rate makes repayments on debts like home, car and personal loans more expensive, forcing consumers to curb non-essential purchases and bringing rampant price increases down. However, on 21 July 2023, the SARB's Monetary Policy Committee announced the repo rate would stay unchanged at 8.25 percent, saying it remains cautious. The main reason a further increase was avoided is the drop in the CPI from almost 7 percent in April to only 5.4 percent in July. The July CPI was even lower than what economists predicted. "For consumers, this means that, barring unforeseen increases in inflation, the repo rate will remain steady and might even be reduced in September, when the Committee meets again," says Kriek. Are there homes to buy? The South African economy created 1.2 million new jobs between the first quarter of 2022 and the first quarter of 2023, despite challenges like inflation, loadshedding and poor service delivery. If the repo rate drops as expected, this will put even more money in people's pockets and boost economic activity. In short, things are looking up for South Africans, especially those with their hearts set on buying a home. Although estate agents report a shortage of stock from resilient homeowners desperate to keep their properties, home loan debtors are clearly facing heavy stress from current high interest rates. The National Credit Regulator reports that while the number of mortgages not in arrears are usually around 91 percent of total home loans, the first quarter of 2023 saw a drop to 88.85 percent. The arrears rate has steadily increased as interest rates climbed higher. "Banks will likely be eager to help owners in arrears with payments start the process of selling those properties, meaning we are likely to see increased stock coming onto the market soon,” says Kriek. “The normal stock cycle in the property market will also return if sellers see positive signals, such as stagnation or decline in interest rates. Until that time, sellers are likely to hold out on selling as much as they can to avoid being price takers.” Is it time to buy? Of course, the best time to buy depends on various factors and conditions, changing from region to region, case to case and price range to price range. However, Kriek says for anyone set on semigrating from the northern provinces to the Western Cape or elsewehere on the coast, the time is ripe to buy and they should not wait. Properties selling against home loan debt typically carry an average sales value of around R1.3 million. Properties at this price point and anything below the average price have seen and will continue to yield a respectable return on investment. “Demand very clearly outstrips supply for properties priced below the average,” says Kriek. The exception is properties in the very high range, above R4 million. "I see evidence that prices will come down further so it may be best for prospective buyers in that price range to bide their time until the market bottoms out,” says Kriek. “Of course, there are exceptions, such as Sea Point or Stellenbosch.” Lastly, Kriek advises that, with interest rates having peaked, purchasers should opt for a variable interest rate instead of a fixed interest rate. "Homeowners taking advantage of the eventual drop in the repo rate can enjoy their property while reducing their bond repayments," he says. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, [email protected], 060 995 6277, www.atthatpoint.co.za For more information on Sentinel Homes please visit: Website: www.sentinelhomes.co.za Facebook: Sentinel Homes  Homes farther out, and more reasonably priced. This is increasingly what South African property buyers are looking for. “There are multiple reasons contributing to this trend,” explains Renier Kriek, CEO of home financing company Sentinel Homes.
"Rising interest rates and the resulting decline in transaction volume are significant factors. The increased proportion of ‘motivated sellers,’ selling because they are in a rising costs squeeze, are now likely to stabilise price growth until the rate hiking cycle eases off or starts to reverse.” According to Kriek, the consequences of the Covid-19 pandemic are also still very visible. “Office vacancy rates have increased, resulting in consumers no longer being as motivated by office proximity when selecting homes. This means they can search for value in outlying areas. Many even semigrate to other parts of the country. We also expect to see a rising level of commercial to residential conversions in urban areas. Semigration and its cousin convenience Kriek names the current hottest markets and sites for real estate investment as the coastal regions from the West Coast to Cape Town and Mossel Bay. “The Mother City remains very popular despite high prices and strained infrastructure,” he says. “This thanks to their loadshedding buffer due to the City’s generation projects and other electricity initiatives, as well as the city’s lifestyle benefits.” He claims that the Garden Route and George Airport’s close proximity make this popular tourist destination just as convenient as Cape Town. “But it must be highlighted that the affordability benefit there is quickly waning because this area has become a focus for immigrants from both inside and outside the Western Cape.” Finally, the West Coast (north of Cape Town) is also seeing a rise in the real estate market, thanks to its charming tiny fishing villages and rural communities like Langebaan, St Helena Bay and Paternoster. “Consumers who work from home are discovering the real value in pricing that was previously only influenced by variables connected to the regional fishing and farming industry. Due to external demand for property, it is now unbound. On the other hand, gentrification problems may result from this and increasingly poor access to housing for families in the bottom half of the income spectrum is a real threat.” Kriek says those still buying property in the economic hub of Gauteng, are shying away from freehold properties, such as single houses on larger plots in unguarded neighborhoods. “They prefer estates and sectional schemes. This is likely a search for safety and services,” he elaborates. Those entering the Gauteng property market will likely find the best long-term investment to be inside a security estate or secured sectional title scheme. Owners of freehold properties in more traditional suburbs may consider cashing out and moving with the trend in the interest of their longer-term financial well-being.” Challenges for First Time Buyers Kriek says that first-time buyers - who make up a very large proportion of purchasers - are moving into the property market much later. This trend is continuing to intensify. The lack of affordable housing supply and inefficient housing finance market in the affordable or gap housing market, specifically properties priced under R750 000, contributes significantly to this trend. “The National government, through the Department of Human Settlements, unveiled significant updates to their Finance Linked Individual Subsidy Programme (FLISP), now called First Home Finance, with the aim to improve access to affordable and gap housing. The expanded policy is still in the nascent stage of implementation, however, and its effects are likely not to be evident in market trends until next year.” Kriek adds that Sentinel Homes offers the first open-market alternative to mortgages. By expanding access to housing finance, it is serving those 5%-10% of housing consumers who lack housing finance, despite being creditworthy and having the necessary disposable income. “Now is the time in the property market cycle to escape the rent trap and start meaningful steps toward long-term financial health. Homeownership is a significant part of that equation,” says Kriek. “You are more likely to buy something you can really afford if you buy it in the current conditions. There is the added upside that prices for properties priced around the average can only really go one way from here – and that is up!” ENDS MEDIA CONTACT: Rosa-Mari Le Roux, [email protected], 060 995 6277, www.atthatpoint.co.za For more information on Sentinel Homes please visit: Website: www.sentinelhomes.co.za Facebook: Sentinel Homes |
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