Despite high interest rates and a buyers’ market, high-income and affluent individuals continue to build their homes from ground up while others take out top-up building loans to expand existing ones. Data from Standard Bank shows that while building loans have declined since 2022, clients aged 30 to 50 remain active, particularly those earning over R50,000 a month. The average value of these new building loans has increased compared to two years ago.
Gauteng leads in building loan registrations, followed by the Western Cape. Both provinces also top the list in terms of customers taking out additional or top-up building loans.
Shifting Strategies
However, Standard Bank has noted emerging trends, such as the construction of multiple units on a single erf, often rented out but not sectionalised to avoid additional costs. “These owners typically don’t plan to sell and prefer not to sectionalise due to time and cost,” says Toni Anderson, Head of Home Services at Standard Bank.
Another growing trend is converting properties into multi-tenanted dwellings for rental income, though banks avoid lending for such projects due to zoning issues and inadequate infrastructure for the number of tenants.
“What we’re seeing is that many of our clients are taking a different approach to wealth creation than what we’ve traditionally been accustomed to. However, many are focused on short-term income generation but need to consider the long-term implications,” says Chiko Manokore, Head of Personal and Private Banking at Standard Bank.
Building multiple units without sectional titles may seem costly now, but it could save headaches in the future. “Short-term decisions can lead to challenges later, especially if market conditions or personal circumstances change,” says Manokore. For example, many investors who build larger homes for rental income often face the need to downsize as they approach retirement, or they may encounter unexpected financial setbacks and be forced to sell quickly—often at a loss.
“The key to successful investment is having a clear conversation with a financial planner about your assets, liquidity, and long-term goals,” says Manokore. “A well-designed strategy, with a focus on a five-, ten-, or twenty-year outlook, helps manage future liquidity needs through tailored insurance and lending solutions, ensuring you’re not forced to sell in a financial pinch.”
Growing homesteads: plan for the future
Provinces with large rural areas, like the North West, Limpopo, the Eastern Cape, and KwaZulu-Natal, have also seen a notable share of building loans over the past three years. High-income clients are increasingly taking out loans to build homesteads, though not all are financed through home loans, as some properties are built on communal land or in areas without title deeds.
This trend is especially common among clients working in major economic hubs like Johannesburg, the Western Cape, and parts of KZN, who invest in large homes for their parents or grandparents in their home villages to create a multi-generational legacy.
However, a key challenge is that these properties – sometimes worth millions – often have no title deeds. “When building such homes, it’s crucial to document who built on the land versus who it was allocated to, to avoid disputes later. This should be clearly outlined in a will or other legal documents to ensure the property is inherited as intended in the event of the owner’s passing,” adds Manokore.
With fewer than 15% of South Africans having a will, according to the Master of the High Court’s 2022 report, Manokore warns that failure to properly document property ownership can jeopardise the transfer of wealth to future generations.
“It all comes down to planning. Wealth building and preservation require careful planning, which is why at Standard Bank we pair all our private bankers with advisers to ensure all blind spots are covered for our clients,” concluded Manokore.
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