South African Consumers Express Financial Optimism but Housing Costs Remain a Major Concern
- Quarterly TransUnion Consumer Pulse Study finds 76% of South African consumers expect their incomes to rise in the next year
- Consumers report cutting back on discretionary spending (52%) and cancelling subscriptions or memberships (28%) recently
- Vast majority of consumers (92%) see access to credit and lending products as important to achieve financial goals
Despite increasing optimism about household finances and repaying their debt faster than a few months ago, South African consumers are becoming more concerned about the rising cost of housing. This is according to the latest Consumer Pulse Study for Q3 20241, published by information and insights company, TransUnion.
With the local economic environment showing signs of stability and GDP growth projected at 1.3%2 this year, there is a sense of cautious optimism, particularly after inflation settled at a three-year low of 4.6%3 in July 2024. Most economists are expecting an interest rate cut before the end of the year suggesting that there is reason for a more positive approach to the market.
According to the TransUnion study, 76% of consumers expect their incomes to increase over the next year, up from 70% in the same quarter last year. Furthermore, 73% of consumers are optimistic about their household finances for the next 12 months, a seven-percentage point increase year-over-year (YoY). In the three months prior to the Q3 survey, 39% of South Africans reported an increase in their incomes, compared to 36% in the same quarter last year.
"Even though increasing consumer optimism is a promising indicator of economic recovery, it is essential not to diminish the financial challenges that many South African households continue to face,” said Fatgie Adams, Head of Credit Risk Solutions at TransUnion Africa.
Some of households’ most significant financial concerns over the next six months include inflation for everyday goods (38%) and jobs (20%). Housing prices remain a concern for 12% of consumers, a three-percentage-point increase from the previous quarter. This underscores the complexities of the local economic market, particularly around consumers’ access to affordable housing and mortgages while maintaining the financial capacity to service debt.
"While the easing of inflationary pressures and potential interest rate cuts provide a glimmer of hope, the rising cost of housing remains a significant concern for many South Africans,” says Adams. “Our latest Consumer Pulse Study highlights that even as household income expectations improve, the affordability of housing continues to be a critical issue that requires attention.”
Financial challenges persist
Despite growing optimism, many consumers report struggling with their financial commitments. The study found that 36% of consumers do not expect to be able to pay at least one of their current bills and loans in full, a small improvement from 37% in Q2 2024 and 38% YoY. Among those who said they’d be unable to pay at least one of their current bills and loans in full, 38% indicated that they intend to pay a partial amount that they could afford, but not the whole balance. Others said they would pay their current bills and loans by borrowing from a friend or family member (24%), while a small group (9%) admitted they did not know how they would pay their bills or loans.
"Our findings show that while some consumers are seeing income growth, the struggle to meet monthly obligations is still very real for more than a third (36%) of the respondents," says Adams. "This indicates that economic recovery is uneven and that many households are still operating under significant financial stress."
Regarding household spending, the study revealed that just over half of consumers (52%) said they’ve cut back on discretionary spending, such as dining out, travel, and entertainment in the past three months. Additionally, a considerable number of consumers (28%) reported cancelling subscriptions or memberships in that time period.
Access to credit considered to be important
The study also sheds light on the perceived importance of credit and lending products.
Most of the consumers surveyed (92%) believe access to credit and lending products is important to achieve financial goals. Despite this, only a portion (36%) of respondents plan to apply for new or refinance existing credit within the next year. Interestingly, more than half of consumers (51%) have considered applying for new credit or refinancing but ultimately decided against it. The main reasons given include the high cost of new credit or refinancing (31%), fears of being rejected due to their income or employment status (29%), no longer needing the credit (26%), and concerns over their credit history potentially resulting in a rejection (25%).
Most consumers regularly monitor credit
Monitoring credit reports is also a focal point for South African consumers. More than half (54%) said they check their credit report at least monthly, although a smaller portion (17%) said they don’t monitor their credit report at all. There is a strong sentiment among consumers that it is extremely or very important (69%) to monitor their credit report. Interestingly, when asked if their credit score would change if businesses used alternative data sources typically not included in standard credit reports such as rental payments, gym membership payments and short-term loans, responses varied. The majority (50%) of consumers believe their score would increase, others think there would be no change (25%), and the smallest percentage feel their score would decrease (10%). The other 15% of respondents are unsure what would happen.
"Regularly monitoring credit reports is a critical step for consumers to take control of their financial health," Adams explains. "Understanding your credit status allows you to make informed decisions and plan effectively, especially in today’s dynamic economic environment."
Rising fraud risks
Identity risks continue to be a concern for South African consumers. The study found that among the 60% who said they’ve been targeted with an online, email, phone call or text messaging fraud attempt in the last three months, 34% reported being targeted by phishing schemes, up from 28% in the previous quarter. Similarly, there has been a 12-percentage point rise to 32% in vishing schemes (fraudulent phone calls that try to trick people into revealing data).
Consumers are eligible to receive one free credit report every 12 months. Consumers can get their free annual credit report from TransUnion here.
ENDS
1The survey of 952 South Africans 18 years of age and older was conducted 16–31 July 2024 by TransUnion in partnership with third-party research provider, Dynata.
2 https://www.afdb.org/en/countries/southern-africa/south-africa/south-africa-economic-outlook