For homeowners who took out a R1m home loan when interest rates were at their lowest in July 2020, their monthly bond repayments are now almost R2 800 more at the current interest rate.
Yet, although it can be difficult given the last steep interest rate increase, Adrian Goslett, regional director and chief executive of RE/MAX of Southern Africa, says homeowners need to prioritise keeping up with the repayments or risk losing the homes and tarnishing their credit scores.
“If things get too tight, act sooner rather than later.”
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To do this, there are a number of options to bring in some extra money to help pay for the higher home loan repayments, one of which is renting out a spare room in your home.
Another, he says, is downscaling to “something more affordable before things get too out of hand”. Living in a smaller space is far more cost effective, which could also help you keep up with the rising cost of living.
“Larger homes often mean running up larger water and electricity bills than a smaller home would. That translates into more disposable income every month for those who choose to downscale.”
By downscaling, homeowners might also need to sell some furniture and other items that might not fit into the new home, which could bring in some extra cash.
“When moving to a smaller home, every square metre becomes essential. This usually means fewer spaces to clean and less space in which to store unnecessary items, which could create a less stressful, less cluttered home,” Goslett adds.
The Coetzee family did just that. Last year, they lived in a large, four-bedroom home with a big office space, huge back garden with a double garage and outbuilding, a driveway, and decent-size front yard. But for affordability reasons, they moved into a three bedroom apartment.
It was a huge adjustment, but eight months down the line, they are much happier.
“We had to sell or donate a lot of stuff due to lack of space in our new home, and the kids had to donate almost half of their toys. But they had too much anyway,” Stefan Coetzee says.
“Our water and electricity costs are much lower, cleaning is so much quicker and easier, garden maintenance is a breeze as we only have a small patch of grass where the kids play outside or we braai, and, as we are in a complex-type set-up with electric fencing, we save money on private security.”
He says the children actually spend more time outside now as they feel safer.
Grant Smee, managing director of Only Realty group, says talks of downscaling remain “firmly on the cards – particularly among middle income earners”.
“Many South Africans capitalised on low interest rates by upscaling and renovating their homes over the past few years. However, the sharp increase in the interest rate has many wondering whether to scale back and cut their losses.
“Rising costs places immense pressure on consumers and will have many relooking their financial position in 2023.”
However, he cautions homeowners to do the math prior to selling.
“Having a knee-jerk reaction can cost you more in the long-term, so it’s important that you look at all the options available to you prior to making your final decision.”
The FNB Property Barometer for the first three months of 2023 shows that 17% of homeowners were downscaling due to financial pressure.
While the figures were higher in the less-than R250 000 price bracket (24.5%) and R500 000 to R750 00 (21.3%) price bracket, even homeowners at the top-end of the home value segment were downscaling.
For sellers of homes valued at more than R3.6 million, 12.5% were selling in order to downscale due to financial pressure, while 16% and 16.1% in the R2.6m to R3.6m and R1.6m to R2.6m value brackets respectively were doing the same. The data shows that 16.4% of sellers of homes valued from R750 000 to R1.6m were selling for the this reason.
As Coetzee says: “Just because you live in an apartment, maisonette, simplex, or duplex, and not a big family home with a garden, does not make your property any less of a home.”
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