Rising interest rates, increased power costs, higher living costs and a weakening currency combined to put consumers – and homeowners – under immense pressure over the past 19 months, which will likely continue in the near term.

In the first half of 2023, there have been reports from estate agents indicating a decrease in sales and buyer inquiries, along with a rise in properties being listed for sale.

According to property economists, the property market’s prices and activity were negatively impacted during the second quarter of 2023 due to interest rate hikes. Credit reports also showed that South Africa experienced an increase in defaults and overdue balances on a quarter-on-quarter basis, the first time since the Covid-19 pandemic.

The picture being painted is one of increasingly tough conditions for homeowners in South Africa.

Property analysts at Lightstone suggest that house prices will fall by 12% from “peak to trough” by the end of 2024, and there is little hope for a strong recovery as “buyers will continue to face higher real costs of borrowing for the foreseeable future,” it said.

The graph below shows how the repo rate has been rising in recent months – with the full impact of 14-year highs yet to be felt.

Millions more spent to service bond repayments

A notable effect of these quickened interest rate hikes is the fact that many South Africans have had to pay considerably more to service their bonds.

Lightstone’s analysis points out that 155,000 homeowners who bought and bonded properties in 2021 are now collectively paying over R600 million or 40% more per month to service their instalments.

The data further shows the spread of these increases based on property values, which the table below shows.

Property value	Total additional instalment value
Under R500,000	R8 311 687
R500,000 to R1 million	R103 785 195
R1 million to R1.5 million	R107 263 492
R1.5 million to R2 million	R97 487 937
R2 million to R3 million	R127 819 562
Above R3 million	R155 792 858
Total	R600 460 731

Of the 155,000 bonds issued in 2021, 46% were to first-time buyers (FTBs), 64% of which account for lower-value properties, while only 17% were for properties in excess of R3 million, noted Lightstone.

The data also shows that affordability in the current market had pushed prospective buyers towards smaller apartments rather than the more expensive stand-alone houses. However, this didn’t save them from crippling interest rate hikes.

“Sectional schemes account for 27% of the increased instalments, and there are developments that will be at risk if affordability leads to defaults,” said Lightstone.

“New developments are more affected as they have a greater proportion of bonded sales which took place when interest rates were low,” it added.

The data noted there are 16 schemes where more than 50% of the development’s units were bonded in 2021. This covers 2,000 bonds which translates into increased monthly instalments of R4.5 million.

Examples of these that also show the pressure being faced by homeowners include:

• A development in Centurion, where 405 out of 520 properties were bonded in 2021 at an average bond value of R660,000. On average, bond payments went up from R5,200 to R7,200 a month, which equates to homeowners combined having to find more than R800,000 a month or R10 million a year.

• Homeowners at another development in Pretoria must find another R500,000 in bond payments per month or R6 million a year. Of the development’s 369 units, 267 were bonded during 2021 at an average of R676,000.

• In Roodepoort, almost all units – 139 out of 144 – were bonded in 2021. This group may struggle with affordability, as instalments have soared from R3,500 a month to R4,800 a month.

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