Small increases in defaults: what it means for property repayments and mortgages
For the Human Settlements Sector to achieve its housing delivery mandate, there is a need for all relevant stakeholders to integrate their infrastructure plans leveraging the Intergovernmental Relations (IGR).
Image: Simphiwe Mbokazi
Data from the credit bureau shows that defaults, however small, have increased in property repayments and mortgages in recent years.
Benay Sager, Chairperson of the National Debt Counsellors' Association, told Independent Media Property that while it was still a very small increase, it has risen compared to a few years ago, driven largely by the pressure that homeowners are under.
'The movements are driven mainly by changes in the interest rates, and if you look at interest rates five years ago, they were very low in the midst of Covid.
"This created a bit of an artificial boom, and since then, the property sector has really slowed down in terms of new purchases. Similarly, in terms of servicing debt in the property sector, things have become a little bit harder,' Sager said.
He added that it is not so much debt levels but interest rates that really impact potential considerations when buying or investing in a property.
The NDCA said interest rates really drive property ownership, and they were already seeing the slowdown here. It said that unless the interest rates drop significantly, which is unlikely to happen, they did not see this make-up changing much in terms of who can buy property and the other big dynamics happening there.
'Some parts of the country are becoming more unaffordable, like Cape Town, which probably means other parts that are more affordable will benefit.'
Sager said that while the property sector is an open market, and that has to be seen playing itself out, rates are a big consideration from a government perspective.
'Rates have been continuing to increase above inflation over the last several years, so perhaps that should be curbed, as we see a significant portion of consumers' expenses going towards paying rates and electricity and other regulated factors.
"If these increases can be curbed, and the entities that provide these services can become more efficient, it will definitely benefit consumers,' Sager said.
Commenting on the release of the DebtBusters' Q1 2025, Sager said over the past nine years, electricity tariffs have increased by 135%, the price of petrol has risen by 88%, and the compound effect of inflation is 52%.
He said as a result, consumers who applied for debt counselling in Q1 2025, on average, needed 69% of their take-home pay to service debt. This was a significant increase compared to previous quarters and the highest since 2017.
The most vulnerable consumers, taking home R5 000 or less per month, use 76% of their income to repay debt. Those earning R35 000 or more spend 77% servicing debt. The ratios for these income groups are the highest since DebtBusters started analysing the data in 2016.
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Speaking at the DEVAC Infrastructure Summit last week, Thembi Simelane, Minister of the Department of Human Settlement (DHS), indicated that the they were advancing legislative amendments to ensure fair access to home loans and eliminate discriminatory lending patterns, prevent illegal land invasions and fast-track formal township development and develop the Human Settlements Bill to reinforce a spatially just housing delivery system.
Simelane said to improve efficiency across the sector, the department is currently expediting the process of developing the Digital Human Settlements 11 Management System (DHSMS), as part of the broader digital transformation strategy of the government, thereby addressing issues of inefficient beneficiary management and unreliable project data.
The DHS minister also said that through their various funding sources and key deliverables, the human settlements sector was able to gazette 50 catalytic projects that are to yield 696 280 housing opportunities of mixed typologies such as RDP Walk-Ups, Free Standing BNGs, Social Housing Units, Affordable Rental Stock, Community Residential Units (CRUs) and Serviced Sites.
She said typical examples of these projects include projects like Lufhereng in City of Johannesburg, Vista Park in Mangaung, Greater Cornubia in eThekwini, Matlosana N12 in North West and the N2 Gateway in the City of Cape Town.
With these projects, the human settlements sector said it aims to accelerate the implementation of the spatial transformation of cities that is aligned with the Spatial Land Use Management Act 16 of 2013, whilst considering that there are limited land parcels that are located closer to work opportunities.
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