The state of community scheme management post interest rate hike

A new set of challenges face community schemes emanating from the interest rate hiking cycle that is squeezing household budgets. The cost of borrowing is on the rise and homeowners and tenants alike are stretched from the impact on their finances.

WatchProp, a leading property management company, warns that homeowners and tenants are feeling the bite of the steep interest rate climb. Managing director, Craig Coetzee, says the country is facing economic hardships as interest rates and cost of living rises on the back of an electricity crisis during a looming cold winter period. 

Community schemes' trustees and managers face challenges in 2023:

• Strain on budgets. Home loan repayments have increased significantly with the interest rate reaching their highest levels since 2009. The increase in borrowing costs will hit those relying on loans to finance their homes and other assets.
• More demand on rental property. Many homeowners will face difficult choices as they struggle to hold on to their fixed assets, leading to an increased demand for rental properties.
• Community scheme levies. A major concern for trustees will be a threat of delayed or non-payment of levies crucial for the maintenance and upkeep of common property. Trustees and community scheme managers will have to be vigilant in navigating these difficulties while maintaining a positive cash flow.
• Communication. Probably the most important aspect in a community scheme is communication. Residents facing financial difficulties are urged to communicate so trustees can resolve matters timeously. Similarly, trustees should keep residents informed of the impact of the economy on the scheme.
• Cost saving measures. Community schemes should implement a range of cost saving measures to reduce the pressure on budgets. This includes electricity and water usage in maintaining common areas. Long term savings could include the installation of solar or energy saving lights to reduce the reliance and costs of being on the grid.
• Renegotiate supplier contracts. Negotiate with contractors to streamline service delivery and maintenance schedules to reduce costs. Proactively seeking ways to reduce costs without compromising on quality may alleviate the burden on the scheme's finances and ultimate provide a cost saving for owners and residents.
• Collaboration with owners and residents. One of the challenges facing trustees is the buy-in of all in a community scheme. By pooling resources and supporting all residents and the Body Corporate or Home Owners Association's trustees, community schemes can overcome the challenges in 2023.

Coetzee says there is no doubt community schemes are impacted by the interest rate hikes and electricity crisis. By communicating effectively, implementing cost saving measures and planning finances, trustees, owners and tenants can weather the storm. As a collective, residents can ensure the stability of their schemes and a healthy environment.

Contact Watchprop for further information on 021 914 6660 or email info@watchprop.co.za