Property stokvels

Stokvels are pooled savings schemes with several members who are obliged to contribute a set amount on a monthly basis. Traditionally, each member receives a hearty payout based on a predetermined rotation.

Stokvels have their roots in the 19th century when informal rotational cattle auctions took place, but they have continued to evolve with the times and, in many cases, have become formal financial entities embraced by saving-savvy individuals with sizeable goals and a shared vision.

Property stokvels emerge

The rise of property stokvels is relatively recent but it is rapidly becoming a trend both in South Africa and abroad.

‘The reality is that the vast majority of South Africans simply aren’t financially equipped to invest in property – young South Africans, in particular,’ says Dylan Carreira-Miguel, a financial advisor from Simplicity Financial.

‘Take into consideration the further financial hardships that are certain to present following the COVID-19 pandemic and subsequent lockdown, and the number of locals with investment potential is set to decline even further,’ he adds.

The beauty of property stokvels is that they enable individuals to pool their money together and this can attract higher interest rates.

‘As the shared wealth blossoms, these individuals will have the opportunity to invest in worthwhile properties and profit from such an investment each month thereafter,’ he elaborates.

Where are these property stokvels popping up?

The answer is simple: everywhere!

Rustenburg Property Stokvel is a great example of one of these investment clubs. Led by real estate agent Lebo Ratema, the stokvel has recently made its first purchase – 12 hectares of land in Rustenburg – and has seen its members grow from 30 people to 88 in under a year.

Property Stokvel Investment Club is another excellent example. This particular stokvel is dedicated to assisting young black South Africans from any province in making smart investments.

How do stokvels work?

Most of these property stokvels operate in the same way. They provide potential members with at least two options or ‘phases’ to choose from, each varying in cost per month, investment period, and benefits. The Rustenburg Property Stokvel, for instance, allows new members to join and contribute R3,300 per month over a period of five years, R4,125 per month over four years, or R5,500 per month over three years. Members are assigned a specific number of shares dependent on their contribution. In the case of Rustenburg Property Stokvel, each member has an equal portion of 100 shares each.

These saving clubs usually have one of two goals: to purchase and rent out a property or properties, following which all members take a share of the monthly income, or to secure homes for every stokvel member in a rotational fashion based on the order that each member joined.

How developers can accommodate this market

There is going to be a significant shift in the property market as our country undergoes massive changes and is faced with new challenges as a result of the global pandemic. Developers need to focus less on marketing to wealthy individuals and more to these budding investment clubs, which are almost guaranteed to skyrocket in popularity.

Developers who do opt to transition their marketing strategy in this regard are likely to benefit from a high level of attention from these stokvels. This is due to the fact that few development companies have yet to cotton on to this investment trend.

‘There is the further advantage that most stokvel organisations will be able to purchase properties in cash, thus making it possible for transactions to be completed timeously and with minimal effort – no need to deal with banks, or to wait for bonds to be approved,’ Dylan adds.

Ultimately, there is certain to be plenty in store when it comes to the collaboration between developers and property stokvels on the horizon. As such, it will pay for developers to ensure that they are thoroughly prepared and equipped to embrace this opportunity with open arms – starting now!