Financial institution FNB reports that due to the escalating living expenses and elevated interest rates, consumers are exploring alternative avenues for home purchasing.
This trend has led to an increase in "group buying," where clusters of up to 12 individuals pool resources to acquire a property collectively.
FNB observed a notable uptick of 36% in this collaborative home buying approach within its loan records during the six-month period ending on December 31, 2023, compared to the corresponding period in 2022.
Mfundo Mabaso from FNB's division specialising in home and structured lending highlighted that those most inclined towards this cooperative purchasing arrangement typically earn a gross monthly salary ranging from R3,500 to R29,600, representing South Africa's middle-income bracket.
He noted that this demographic has been significantly impacted by the challenging economic landscape in South Africa, prompting them to seek affordable housing solutions.
As living costs surge and interest rates remain stubbornly high, they find solace in collective strategies.
Internal data from FNB indicates that this trend is particularly prevalent in Gauteng, closely followed by the Western Cape.
Remarkably, while collective buying is popular in the realm of affordable housing, there's also considerable interest from wealthier clientele and families seeking holiday homes or financing for relocation residences, Mabaso added.
Persistent High Interest Rates
South Africa has grappled with a 15-year high in interest rates for nearly a year, with the repo rate reaching 8.25% in May 2023. This marks the highest level since May 2009 when the rate stood at 8.5%.
Initially, there were expectations in 2024 of an interest rate reduction cycle possibly commencing around March, with projections of up to 100 basis points being slashed by year-end.
However, these anticipations have been dampened, with the most optimistic outlook now forecasting a reduction of 50 basis points in the final two meetings of the year.
Moreover, it's increasingly probable that there will be no interest rate cuts throughout 2024, with numerous economists and financial entities only considering the start of a cutting cycle in 2025.
The primary factor behind the prolonged period of elevated rates is persistent inflation, which has yet to stabilise at the South African Reserve Bank's target of 4.5%.
Additionally, a more cautious stance from major international central banks, notably the US Federal Reserve, contributes to this scenario.
The Reserve Bank has emphasized that it will refrain from adjusting South Africa's monetary policy until it is assured that inflation is within manageable levels.
The next meeting of the SARB is scheduled for May 30, following the national election, and current forecasts suggest a continuation of the status quo in terms of interest rates.
In light of the expectation for prolonged higher interest rates, homebuyers are increasingly likely to explore alternatives such as collective purchasing, according to Mabaso.
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