Homeowners might have a tough time in 2023
Maintaining a house in the current economic conditions is proving to be harder than many South Africans thought. And that should continue during the new year. See below for details.
by Aline Barbosa
Many are being forced to downscale or sell their properties due to rising costs.
Many homeowners will be giving up their homes in 2023. According to a recent research by MortgageMe, the rising living costs combined with interest rate increases and unemployment will force many South Africans to downscale, while others will go back to the rental market.
Andrea Tucker, director of MortgageMe, says that the reasons for selling are many. At one end, homeowners face financial pressure on households due to job losses. Then, there’s a higher-than-expected cost of living because of inflation.
Because of those reasons, individuals and families are trying to cut back on their spending and reduce extra costs by downsizing their homes. Especially if it makes financial sense to them in short and medium terms.
Tony Clarke, the managing director of the Rawson Property Group says that inflation became a real challenge almost overnight in 2022.
In order to minimise the consequences, the Reserve Bank had to implement higher interest rates than it had been previously announced. This effort, alongside the rising cost of living, put a dent in homeowners and potential homeowners affordability.
As a result, Clarke said that the property market activity slowed down significantly, alongside a surprising rise in sales and downscaling. The imbalance in supply and demand led to a slow growth in property price.
Additionally, inland properties and homeowners face even more pressure due to the ongoing semigration to coastal areas.
Downscaling still seem like the most viable option for homeowners
Clarke believes these trends will continue throughout the year. He says that nominal price increase should remain positive, but subdued for the foreseeable future.
Grant Smee, managing director of Only Realty Property Group agrees that talks of downscaling will remain firmly on the cards. Especially among homeowners with middle income.
He says that a large portion of South Africans capitalised on low rates by renovating their homes and upscaling over the last few years. Now, with the steep increase in interest rates across the country, homeowners are wondering whether they should scale back.
He finishes by saying that rising costs put pressure on consumers, and will have millions reevaluating their financial positions in the new year. He also caution homeowners to take a step back and do the math before selling their homes.
That’s because making an impulsive decision can cost them much more in the long-term, he believes. So it’s important to look at all the available options before making a final decision.
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