Bad news for South African homeowners 

South African homeowners are buckling under the country’s financial headwinds as almost a quarter of the homes put on the market are due to financial pressure.

This is feedback from FNB senior economist Siphamandla Mkhwanazi, who told Kaya Biz that 2023 is not a good year for property owners.

FNB data for the third quarter of 2023 shows that 23% of homes on the market are due to financial pressure.

While this figure is relatively unchanged from the previous quarter, it is still higher than the historical average of 18% recorded since the end of 2007.

Mkhwanazi said about half of the homeowners disposing of their properties are looking for a cheaper property.

However, the property market is still experiencing excess supply with insufficient demand, as there are not enough new entrants buying houses.

“With that balance of forces, it does mean that property values are still struggling at the moment and languishing behind the inflation rate,” he said.

“What that means for a home-owner is that your investment in real terms is not necessarily good, which is a good thing for those who are entering the market, as you want to enter at a cheaper level.”

He said the most significant pressure weighing on property owners is South Africa’s high interest rates.

The country’s repo rate has stood at 8.25% since the Monetary Policy Committee’s meeting in May of this year, with the prime lending rate at 11.75%.

Mkhwanazi said FNB expects interest rates to remain at this level for the next few months and that a cut is only coming in the second half of 2024. “So, we are going to see a continuation of that pressure,” he said.

The only saving grace for consumers is early signs that real wages are now turning positive, although at a very low level.

This would be a good thing, considering workers have been getting below-inflation wage increases since 2021, he said.

“The combination of that and the cut in interest rates next year will probably be the saving grace for the consumer.”