Shelter or income generator — Risks and rewards of owning a property

Daily Maverick

02-07-2025

In South Africa, keeping a roof over your head means more than just making monthly payments, it's about doing whatever it takes to hold onto the family's most valuable asset.
Whether you're in a townhouse in a leafy suburb, or in a crowded taxi in a township, you probably know someone who's moved into a back room or a smaller flat so they can rent out their main home and keep up with the bond.
'The property is most probably the biggest asset you will ever own,' said Mfundo Mabaso, product head of FNB's home and structure business unit.
For many South Africans, especially first-generation homeowners, a house is more than shelter; it's a symbol of progress and a vessel for generational wealth.
But what happens when life throws a curveball and money gets tight?
An all too common trend
Mabaso has seen families 'vacate the main home and take residence in the garage to rent out the main home so that they can keep up with the repayment of the bond.' For them, losing the property is unthinkable. It's the last thing they're willing to give up.
Two speeds of property investment
Mass-market homeowners: These are often first-time buyers who see property ownership as a milestone and a way to build wealth. When financial pressures mount, these families might downsize within their own property – moving into smaller spaces like garages or back rooms – and rent out the main home to cover bond repayments.
Affluent investors: Those with multiple properties who, when faced with economic challenges, tend to rent out their primary residences and downsize to smaller units. This strategy helps them maintain their investment portfolios and keep their long-term financial plans intact.
Even if you're rich, you aren't immune to financial pressures. Mabaso explained that when wealthier families hit hard times, they often rent out their primary residence and downsize to something more manageable, all in a bid to hold onto their investment properties and keep their financial plans intact.
The numbers behind the struggle
This determination to hold onto property is riding a swell of a rising market. Property prices in South Africa are soaring, with the average residential price surpassing R1.6-million for the first time, and the annual growth rate in average residential prices now reaching 6.4%.
Source: The Africanvestor
Pieter Wessels, trustee of the PD Wessels Trust and owner of a Stellenbosch property, understands this well. 'Property like a house or flat is 'bricks and mortar'. You can see it,' he said.
For Wessels, the appeal lies in leveraging a relatively small deposit into a significant investment, something much harder to achieve with shares or crypto.
However, he quickly pointed out the risks. 'The less you pay, the easier it is to earn a better return in the form of rental. If you buy in a 'good' area, you might also get meaningful capital growth on your property apart from earning rental income.'
Legal fees, transfer costs, and taxes on rental income are all part of the reality check for would-be investors.
Security in a steady job
While Wessels approaches property ownership from an investment perspective, others such as Thato Pheko, a high school teacher in the Free State, focus on the security that comes with steady employment.
For Pheko, buying a house on a bond was about providing her children access to better schools near the city. 'I manage the payment with my salary,' she told Daily Maverick.
Pheko feels insulated from major risk because she works for the government; a sector where, in her experience, sudden job losses are rare.
'I do not feel that there is much risk for me because I work for the government,' she said, confident that her employment stability will see her through the life of her bond.
What this means for you
Understand the full cost of property ownership: Beyond the purchase price, factor in legal fees, transfer costs, taxes on rental income, and ongoing maintenance;
Plan for financial fluctuations: Job security and steady income can help, but unexpected challenges happen. Know your options, such as payment holidays or loan term extensions, and communicate early with your lender if you face difficulties; and
Seek professional advice: Whether it's financial planning, tax implications, or legal matters, expert guidance can help you make informed decisions and protect your investment.
When trouble strikes
Financial stability can be fragile. Mabaso urged homeowners not to wait until it's too late. 'When you hit hard times, talk to your bank and that's the best thing that you can do for yourself.'
Too often, he said, customers avoid the conversation, missing out on solutions such as payment holidays, interest-only periods or term extensions.
If those options don't do the trick, banks may offer a 'quick-sell' process to protect your credit record before repossession becomes the only option. 'The execution or repossession of the properties is the action of last resort,' Mabaso said.
By understanding the risks and rewards and knowing when and how to seek help, you can better navigate the complexities of the market and safeguard your home for the future. DM