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South Africans under pressure to sell their homes in the face of rising living costs

Most sellers are downscaling either due to financial stress or life age. Picture: Thirdman

Most sellers are downscaling either due to financial stress or life age. Picture: Thirdman

Published Jun 24, 2022

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A significant number of South Africans are being forced to sell their homes due to financial pressure while high numbers of those who own expensive homes are selling them in order to emigrate.

FNB’s most recent property barometer statistics reveal that most sellers in February (21%), were giving up their homes in order to downscale due to life age. However, 18% were selling due to financial stress.

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Breaking down the data into property price segments, it shows that 28% of sellers of homes valued at R750 000 and under are downscaling to more affordable accommodation as a result of financial pressure. This is the only price segment in which financial pressure accounts for the most property sales, with selling/downscaling due to life age leading the reasons across all other price segments.

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Interestingly, selling for the purposes of upgrading to bigger and better properties accounts for 15% of sales – the third most common reason for selling, the statistics reveal.

While emigration-related sales only account for 9% of sales across the board, this reason is prominent amongst sellers of more expensive homes, with 15% of sellers in both the R2.6 million to R3.6 million, and the R3.6m-plus segments listing their homes for this reason.

Source: FNB/Siphamandla Mkhwanazi

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Gerhard Kotzé, managing director of the RealNet estate agency group, says a quick survey of RealNet principals around South Africa has revealed that the main reasons for selling depend on area, and also whether owners are selling their primary residences or secondary properties such as rental units and holiday homes.

“In the latter case, the main reason for selling now is clearly financial pressure, with owners seeking either to free up cash or to cut their monthly expenses. However, when it comes to primary residences, the main reason for selling, currently, appears to be semigration, downscaling for the over-50s, and consolidation of families.”

He adds that he has not seen a predominance of sales yet due to financial pressure, although the number of homes being entered into the banks’ distressed sales programmes is rising – a “clear indication” that a big shift in the market is coming as interest rates continue to rise.

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“As for emigration, many of those who had plans to leave South Africa appear to have put those on hold, and such sales now account for a very small percentage of the total. What we are seeing to an increasing extent, though, is the movement of families to secure states so that the breadwinner can work abroad on long contracts.

“Highly skilled South Africans are increasingly head-hunted for well-paid positions in the Middle East and the rest of Africa, for example, where they may only come home a few times a year, and they want their families to enjoy safety and a good lifestyle while they are away.”

Most semigration, Kotzé notes, is taking place to the Western Cape from other parts of the country, with Cape Town, the Hermanus area, and Garden Route towns being the favourite destinations.

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In addition, family consolidation, which has increased since the pandemic and the forced separation of various family members due to lockdowns, is driving the sale of separate homes for parents, grandparents, and grown children, and increasing the demand for homes where two or more generations can easily be accommodated together.

“These include family homes with ‘granny flats’ or cottages, and larger properties with multiple residences.”

He notes too that plans to downscale are a “major sales driver” for many homeowners in their 50s and 60s, especially if they are empty-nesters tired of managing, maintaining, and paying the rates, security, and insurance costs on big family homes.

“But once again, the main consideration for such sellers is often not financial, since they will often spend as much or more on their new homes.”

Since the onset of Covid-19 and the “huge reduction” in the interest rates, property sales and values have been “positively affected in the Western Cape”, says John Weston, sales partner for Rawson Properties in Bergvliet, Constantia, and Ou Kaap.

Many property owners have taken advantage of the low interest rates and the opportunity to upgrade into better areas – often into sectional title complexes, for security reasons. Younger families are also selling so they can buy higher-value properties in better areas closer to good schools. There has also been a “surge” in sellers emigrating now that other countries have reopened their borders, he says.

In a number of instances, young families and their parents have been selling their homes, and then combining the profits to purchase dual-living accommodation.

In his area, there are “very few” stressed sales happening thanks to the banks having given many homeowners ‘payment holidays’.

“This has encouraged good equity growth in property, particularly in the lower end of the market. Another factor for people selling their homes is that the banks have made it attractive by offering good interest rates and often 100% to 105% bonds to assist particularly first-time buyers...”

Weston adds that many people have sold their properties to buy bigger ones as they require work-from-home space.

“The huge reduction in travel costs, particularly where both parents work from home and previously travelled in two cars, allows for a larger bond repayment and more spacious living accommodation, without affecting bottom line income.”

Elsabe Lombard, sales partner at Rawson Amanzimtoti and Scottburgh in KwaZulu-Natal, says most sellers are leaving the province, either to semigrate for work or emigrate. Those who are selling to stay in the area are downscaling, often to lock-up-and-go apartments.

In Gauteng’s Waterkloof and Faerie Glen areas, Bertie Lombard, franchisee for Rawson Properties there says most people are selling to either downsize or retire.

“On the flip side, younger people are selling their starter bachelor or two-bedroom units to buy bigger homes to accommodate growing families and in areas close to schools. These buyers are especially buying in estates for security reasons...A handful of our clients are selling to move to the Western Cape.”

The main driving factor for buyers moving to coastal and country areas remains semigration, says Barbara Larney of RE/MAX Town and Country.

“The most activity is seen at the coast (Gansbaai and surrounding areas) especially in the between R2.5m and R5m price range.

“Remote working and people wanting space, security, and an outdoor lifestyle is still a major trend. Buyers are looking for a quality lifestyle, but they are also looking for value because of the current global economic status.”

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