Financial stress: SA homeowners selling their properties in droves

Almost a quarter of home sellers are giving up their homes due to financial pressure. Picture: Alex Green/Pexels

Almost a quarter of home sellers are giving up their homes due to financial pressure. Picture: Alex Green/Pexels

Published Jul 20, 2023


The number of South Africans who have been forced to sell their homes because they can no longer keep up with their bond repayments is rising rapidly.

And many more on the brink of selling are watching the upcoming interest rate decisions.

In the first three months of this year, 17% of sellers were giving up their homes due to money issues, but the latest figures show this figure to have climbed to 24% for Q2 2023.

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This is 6% higher than the historical average of 18%, and just 6% lower than the 30% reported in the last three months of 2022.

It is also 4% higher than the same period last year, says FNB property economist Siphamandla Mkhwanazi.

As expected, sales due to financial pressure are disproportionately higher in the affordable market segment, with an estimated 32% of sales for this reason.

“This reflects the impact of the sharp increase in debt servicing costs, which should have a more pronounced impact on lower-income households.”

In Johannesburg and Randburg, about 10% of the market selling their primary residence is under financial pressure, says Cobus Odendaal, chief executive of Lew Geffen Sotheby’s International Realty in those areas. With second/investment properties, the percentage is larger, between 15% and 20%.

“What we’re also seeing is that there is an increasing number of potential sellers sitting tight to see what happens with the interest rates in the near future. However, many are already on their reserves, so I suspect to see an influx of financial pressure properties on the market in the near future if a semblance of stability doesn’t return soon.”

He adds that the return on investment of second properties is clearly under pressure because rental income is not keeping up with increasing bond repayments, and many landlords are beginning to fall behind.

About 25% of sellers are downsizing due to other reasons, but Odendall says this number could increase depending on sentiment, confidence, and interest rates.

“There are numerous reasons that people downscale and not all are due to financial pressure. Many people still move into a smaller home when they retire or once the children have moved out – often times to a low maintenance, lock-up-and-go option which allows for easier travelling.

“But, yes, sadly there are more people downsizing these days out of necessity and to keep their heads above water in increasingly trying financial times.”

Richard Gray, chief executive of Harcourts South Africa, says the number of people selling because they can no longer afford their homes depends on the price bracket. In the mid- to lower-market, the proportion is far higher at 20% to 30% compared to the higher price brackets where the proportion is about 10% to 15%.

Since last year, the numbers have “definitely increased”.

“The primary reason has been the increase in the prime lending rate but is also coupled to other factors such as load shedding, fuel prices and general cost of living. We have also seen an increase in bank-assisted sales where clients have fallen behind on their mortgage payments.”

The volume of people selling to downscale is 15% to 30%, with financial pressure being the main reason.

“Secondly is the empty nest syndrome whereby the children have grown up and flown the coup and the property is now too big for the remaining parents, and thirdly, from a security perspective, people are downscaling from big freeholds to smaller units in what is perceived to be a more secure environment,” Gray says.

Many sellers who give up their homes due to affordability struggles end up renting after selling as they have had to enter an acknowledgement of debt with the banks for the shortfall on their property that was sold.

“Those that still have access to finance or who are downscaling for reasons other than financial tend to favour buying. There is still a strong view, especially with the older generations, who make up the majority of those downscaling for non-financial reasons, that owning is preferable to renting.”

David Jacobs, Gauteng regional sales manager for the Rawson Property Group, is also noting an increased number of bank distressed sales. The interest rate hikes have caused problems, particularly for the first-time home buyers who went in at maximum capacity over the past three years since the interest rate came down drastically.

“They are now finding it difficult to maintain these payments with the interest rate hikes.”

The FNB Property Barometer breaks down the Q2 2023 reasons for selling: