An estimated 2.4 million South Africans now earn their living through self-employment, according to StatsSA – and this growing wave of gig workers is fast becoming a discernible force in the property market.
Although variable income has traditionally been seen as a barrier to homeownership, Bradd Bendall, BetterBond’s National Head of Sales, says the bond application process is becoming more accessible for this burgeoning group. “In fact, many lenders and banks recognise that self-employed applicants are entrepreneurs with a proven track record of running a successful business, and they are therefore often seen as a lower lending risk. In an evolving property landscape, the rise of freelancers and the gig economy is reshaping traditional notions of income stability and bond qualification,” he explains.
South Africa’s unemployment rate reached 33.2% in the second quarter of the year, according to StatsSA’s latest Quarterly Labour Force Survey. This, coupled with the post-pandemic shift to remote work, has driven many South Africans into flexible and contract-based employment, either by choice or necessity, says Bendall.
Bendall says freelancers can improve their chances of approval by consulting a bond originator if they are thinking of investing in property. “By working with a bond originator who can advise on how to qualify for a bond without a fixed income, and apply to multiple banks on their behalf, a freelancer stands a much better chance of securing a home loan,” he says. “The applicant does one set of paperwork, and the bond originator ensures that all the required information is ready for submission to make the application process smoother – and there’s no charge to the homebuyer.”
Typically, banks may offer self-employed applicants around an 80% bond, but Bendall notes that this is becoming more flexible. “It is becoming somewhat easier to secure a little higher, depending on the applicant’s individual risk profile,” he says. While self-employed applicants may need to work harder than those in formal employment to demonstrate affordability, Bendall believes homeownership is still well within their reach. “By preparing properly, gig workers and freelancers can also be proud homeowners. Being your own boss should not preclude you from being able to own your own home.”
Top tips for self-employed homebuyers:
- Make sure your tax and financial statements are up to date.
- Keep an eye on your credit record. Avoid unnecessary debt.
- If possible, separate your personal and business income and expenses. Banks will assess your affordability and separate statements will make it easier to assess your financial status. Note that affordability is assessed primarily on your drawings or income taken from the business, not the overall turnover or profit of your business.
- Save as much as possible for a deposit. This shows banks that you are a lower lending risk and improves your chances of being offered a competitive interest rate.
- Complete a bond pre-approval so that you know how much you can afford before you find your dream home. This process includes a quick credit check that gives a good indication of your credit score and whether you need to look at ways to improve it before applying for a bond.
When applying for a bond, freelancers will need the following:
- The last two years’ sets of financials. If your financials are older than six months, you’ll need up-to-date signed management accounts.
- An auditor’s letter confirming your income and expenses paid for by the business.
- A signed personal statement of assets and liabilities, and personal income versus expenses.
- Personal and business bank statements for the last three months.
- The most recent IT34 from SARS.
As gig workers and freelancers tend to work on short-term contracts, they are inclined to be more mobile and flexible, says Bendall. Property preferences include sectional title units or micro-apartments that meet their basic needs. High-speed internet connectivity, office space and access to communal lifestyle amenities may be high on their priority list when considering accommodation options. Although many of these workers will opt for short-term rental accommodation, those that do invest in property may combine their financial resources with a friend or partner to apply for a joint bond.
“Fortunately, with more people opting for the flexibility and independence of contract work, there has also been a shift in how banks and bond originators assess affordability, allowing these buyers to become an increasingly influential force in the housing market. Being self-employed is no longer a barrier to homeownership,” concludes Bendall.
