The future looks bright for South Africa's township property market
Township property prices are rising much faster than the rest of South Africa’s residential market, according to the First National Bank (FNB) house price index.
702/CapeTalk’s Redi Tlhabi spoke to Professor Francois Viruly, Property Economist and Associate Professor at UCT's Department of Construction Economics and Management. He was asked why people are choosing to stay in the townships rather than in the suburbs.
I think what is happening is that there are certain runs missing out of the housing ladder at the moment. This particular study suggests that the township prices average about R300 000 to R325 000. Now the next step into the suburbs shifts you into R700 000 to R800 000 and so forth. For most people it is difficult to make that next step into the suburb which means it fuels the township market where people have to stay in that market because they can’t move out.Prof Viruly
According to the price index, township house prices in six major metros including Cape Town, Johannesburg and Ethekwini have risen by 11.6 percent in the first quarter of 2015. Prof Viruly says that we are experiencing a catch up game between township and the suburbs.
What drives the growth?
The prohibition against selling an RDP home newer than eight years old has lapsed and now people are renovating and selling RDP houses.
Rentals make up a significant part of the township market, providing further impetus.
Townships have significant developments. The building of malls and shopping centres also boosts the market. Houses that was previously worth R300 000 now cost R500 000, because they are located next to a mall.
Infrastructure is improving in the townships and they cater for different income groups. People are no longer obliged to move to the suburbs once they start earning more money.
From 2004 to 2014 South Africa’s average real GDP (adjusted for inflation) grew by 3.1 percent and employment grew over 11 percent, fuelling the growth of the black middle class.
Professor Viruly says we need to normalise the market first. He says the ownership papers to most township houses are not in order. Once these are in order, an owner can use her property as collateral, for example start businesses, he says.
Who is buying township property?
- The market has reached a point of saturation in metropolitan areas, forcing developers, institutions and property companies to look elsewhere for opportunities. The search is pointing towards township and rural areas (Moneyweb.co.za).
- First time buyers (young professionals) who are moving into this particular market with two incomes (a couple staying together).
- Buy-to-let investors.
- Companies are also buying into the market and developing properties.
Here are some of the comments from Twitter:
@RediTlhabi I can understand the value of houses in Soweto, but Tembisa houses are value are ridiculous!!— Zee Nkosy (@ZanKaTshepo) May 21, 2015
@RediTlhabi Problem with township property market is that it's not liquid.People don't sell for sentimental reasons.— KABELO MG (@KabeloMG) May 21, 2015
.@RediTlhabi this makes it difficult to buy and sell property because you need to first trace the ownership before u can transfer— DKH (@africanbison) May 21, 2015