South Africa has a severe shortage of affordable housing for senior citizens, and adult children are increasingly facing the challenge of trying to provide secure, dignified accommodation for their ageing parents without derailing their own financial futures.
“And with the average age of first-time homebuyers in SA having risen to 36 - an age at which many people’s parents may already need housing support - the window for proactive planning to deal with this situation is narrower than many people realise,” says Stephen Whitcombe, MD of leading Johannesburg property group FIRZT Realty.
“For many reasons, South Africans are simply not saving enough for retirement, and according to data from the National Treasury, only about 6% of people who reach 65 now will have enough money to maintain their pre-retirement lifestyle, while the rest can expect to face increasing financial pressure as they age and join the 50% of existing retirees in SA who are already unable to make ends meet.
“So it’s not surprising that 90% of people under-60 say they expect to keep working after 65 and will probably only be able to retire at 80. But the problem with this ‘plan’ is that it does not take into account that their health may not allow them to work that many extra years, or that they may have high medical and care costs that make it impossible to afford decent housing without family help.”
In addition, he says, this is a situation that most families unfortunately only start dealing with once there’s a crisis. "By that point, the best options have often closed, while families who plan even five years ahead will have more choices and can expect much less financial stress.”
One of the best options, for example, is for adult children to build their parents a self-contained cottage or flatlet on a property they already own – or to buy a home with an existing ‘granny flat’ or outbuildings that they can convert. “This way, any capital you invest is going into your own property and increasing its value. At the same time, your parents can enjoy independence and dignity with their own front door, and live close enough for practical support.
“In the South African context, this plan has additional advantages: the building cost can often be financed, and security provisions, solar systems and borehole or rainwater harvesting can be shared across both dwellings, reducing ongoing costs significantly. Live-in domestic help or caregiving is also much easier to coordinate when parents live on the same property.”
Whitcombe says a well-designed, 60sqm cottage could cost between R900 000 and R1,5 million to build, depending on finishes and location, but in high demand areas would quickly add more than the construction cost to the property's value. “And when the unit is eventually no longer needed for the parents, it could become a rentable asset generating R7000 to R13 000 a month (at current rantes), or a place for the owners themselves to live when they retire.”
He also notes that while design choices matter enormously, they cost relatively little if planned in. “Wide doorways, level-access showers, no internal steps, reinforced bathroom walls for future grab rails and strong lighting are all features that can be built in from the start for a fraction of what retrofitting costs later.”
Meanwhile, a growing number of families are taking a practical approach that runs in the opposite direction: rather than an adult child buying a property of their own with room to house their parents, they are moving back to their original family homes, usually with plans to buy these properties from their parents.
“This makes particular sense for adult children who are still renting and saving up to buy their first homes,” says Whitcombe. “Moving back into a family home owned by their parents most often enables them to pay little or no rent for a certain period and save aggressively for a deposit to acquire the property, while also creating natural proximity for caregiving.
“Of course the arrangement needs to be properly planned and legally structured, but the advantage for parents is that it provides them with certainty about being able to liquidate their biggest asset and have proceeds they can use to buy or build a smaller home, or simply to boost their retirement funds. For the adult child, this plan can accelerate their ability to buy instead of rent, and provide the opportunity to acquire a known property at a fair and possibly modestly discounted price.”
Standard transfer duty may still be payable because home sales to family members are not exempt, he says, and capital gains tax may apply for the parents depending on how much the property has appreciated over the years, although the threshold is now R3m on a primary residence.
“Whichever of these routes a family chooses, the two main factors that will determine a happy outcome are advance planning and ensuring that all agreements are properly formalised by an attorney. In our experience, informal arrangements made between family members – and especially siblings – about contributions, occupancy rights and future estate distribution are a guarantee of disputes when circumstances change or when parents pass away.
"The families who navigate these situations best are the ones who anticipate them and plan ahead to keep their property assets in the family while providing genuine security for older parents.”
