Bad news for home owners in South Africa

Expenses related to selling a house in South Africa have grown significantly over recent years and now average around R150,000.

This is according to Taurus Capital’s head of property bridging finance, Elad Smadja, who said people who want to sell their houses are often shocked about the expenses related to the sale.

He said the average expenses related to selling a house in South Africa can amount to over R150,000.

“It takes months to process sales and transfer ownership at the Deeds Office, during which sellers do not have access to money from the sale,” he said. 

“Consequently, instead of easing their financial burdens, the high costs may become overwhelming and add additional stress to property sales.”

He explained that money needs to be exchanged to “kick off” the property sale process. Sellers need to pay for rates clearance certificates, outstanding levies, bonds and legal fees. 

In addition, if the seller is purchasing another home, they will need a deposit, and there will be moving costs.

Smadja listed several costs to consider when selling your home – 

• Bond cancellation: Bond cancellation costs are managed by a bank’s appointed attorney and include bond cancellation fees and pro-rata interest.
• Rates, taxes, and levies: Sellers are responsible for paying rates, taxes, and levies up until the property’s registration date.
• Compliance certificates: Sellers will need to obtain certificates for electrical, plumbing, and beetle inspections. These certificates typically range from R500 to R1,000 each, and potentially more if issues are uncovered during inspections as they will need to be fixed.
• Repairs and maintenance: Preparing a property for sale may require investment in repairs and maintenance to make it more appealing to potential buyers.
• Moving costs: Moving costs include expenses related to packing, hiring a moving company, storage, transportation, and potentially temporary accommodation if your new property is not immediately available.
• Personal debt: For example, school fees or credit card payments.

“Typically, it takes around three months for a property sale to be completed, adding more stress to an emotionally and financially taxing situation,” he said. 

“Having your money tied up in a property that you can’t access is cold comfort while you wait.”

Financial pressure

FNB senior economist Siphamandla Mkhwanazi told Kaya Biz last year that 2023 was not a good year for property owners.

He said 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.

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.”

This year has also not been kind to South African homeowners, as house price growth stagnated in January and price growth bottomed in the fourth quarter of 2023 – but there is hope.

The FNB House Price Index growth averaged 0.6% year-on-year in January 2024, unchanged from December 2023.

FNB said the sideways movement in house price appreciation is consistent with its view that price growth bottomed in Q4 2023.

However, it could also indicate that a discernible upward trend should commence in the second half of this year once affordability improves. 

Market strength indicators suggest that both demand and supply of properties for sale are contracting and by a similar magnitude. 

Following the above-trend transaction activity between 2020 and 2022, demand for residential property is expected to have reached its lowest point in 2023. 

Mortgage volumes have decreased by 28% due to affordability constraints that are keeping potential buyers away, as well as individuals searching for more affordable properties. This has been reflected by the compression in average loan sizes. 

Similarly, data suggests that house price growth may also have reached its trough in the fourth quarter of 2023 – its lowest level since the Global Financial Crisis. 

Nevertheless, lower-priced segments outperformed, reflecting the buying-down effect and the persistent supply deficiencies. 

Meanwhile, some high-value segments, particularly in regions along the Western Cape coast, gained support from the semi-gration trend, which now seems to be normalising.