South Africans are nothing if not resourceful so it’s not surprising that many house buyers are pooling their income to invest in property as a collective. “Instead of walking away from property as a viable investment, we are seeing more people buying property as a collective to cope with rising living costs and high interest rates,” says Bradd Bendall, CEO (interim) of BetterBond.
FNB, one of the larger banks that offers loan products allowing up to 12 people to buy a home together, reports a 36% increase in collective buying loans for the six months ending December 2023 compared with the same period in 2022. The bank also notes that buyers with a monthly income of between R3 500 and R29 600 are increasingly considering buying as a collective to navigate high interest rates and inflationary pressures.
“BetterBond’s data for May shows a 34.9% increase in bonds for homes of between R500 000 and R1 million in the last 12 months. Many of these buyers are likely buying as a collective to increase their chances of securing a bond and maintaining the monthly bond repayments,” says Bendall.
According to Bendall, multigenerational is prevalent in South Africa with StatsSA’s General Household Survey (May 2024) classifying 39.2% of households as double generational – with parents and children living together, and almost 14% having three generations in one home. “With many households having to tighten their belts to make it through the month, it makes better financial sense to share household and bond costs by having more than one generation living together,” he adds.
Multigenerational living has many benefits, including an established support system if there are young children, a sense of purpose for older parents who are included in childcare, and financial stability by combining incomes. However, it does have its challenges, cautions Bendall. “It’s important to make sure there are clear boundaries so that privacy and independence are not impinged. Larger properties that allow for a communal area as well as private space for the respective parties to enjoy time alone work best for this type of living arrangement.”
FNB reports that Gauteng followed by the Western Cape are the top two provinces for collective buying according to data for the last six months. Many of these collective buyers in the Western Cape will likely be more affluent buyers investing in a secondary or holiday home with family or friends, says Bendall. Who also says, “So while we are seeing a large number of buyers at the lower end of the market making ends meet by pooling resources, we are also seeing more buyers in the R1.5 to R2 million price range partnering with friends or family to buy a second home – often as a holiday option. BetterBond’s data shows a 20% increase in bonds granted in this price range.”
While buying as a group sounds appealing, be sure to have a clear understanding of who owes what before you buy property as a collective. Some considerations include transparency about all parties’ finances. “All parties must be able to qualify for a bond on their income if the collective arrangement falls through,” advises Bendall. Also, the credit scores of all parties will be affected if one of the group defaults on their financial commitments. The bond will be registered in the names of all the owners, and this will also be reflected on the property’s title deed.
Collective buyers should ensure that any agreement to buy as a group is formalised in writing. It’s therefore advisable to have a lawyer draft a co-ownership agreement to protect all those involved, says Bendall.