The affordable housing market, which many property developers shied away from for many years, is amassing strong interest on the back of insatiable demand for low-cost housing solutions.
It is only recently that industry players started to understand the dynamics and housing needs of affordable housing consumers.
For the past two years, the performance of this market has trumped major metropolitan areas on price growth. Figures from FNB show former townships experienced house price growth of 11.6% for the first quarter of 2015, compared with 9.3% in the previous quarter. The market has continued to outperform major metropolitan areas like Cape Town, Johannesburg, Tshwane, Nelson Mandela Bay and eThekwini, which showed a growth rate of 7.3%.
FNB household and property sector strategist John Loos says the market is driven by first-time buyers who are value-conscious. He says 25% of customers are first-time buyers, from 28% in 2014.
The bottom end of the affordable housing market can fetch property values of around R350 000 and below, whereas R600 000 is a price level considered as the top-end market, says property economist Francois Viruly. Viruly says there is a difference between the social (which is considered as the RDP market, backed by government subsidies) and affordable market.
“If you are earning R3 500 per month you are probably in the RDP market. If you are in the affordable market you are probably in the bonded market and probably earn R7 500 per month,” he says. The bottom-end affordable market is often referred to as the “gap market” as these consumers do not qualify for bonds or housing subsidies from the government. Only about 30% of South Africans do not need housing subsidies, but 70% are in social and RDP housing.”
“It’s very nice to say we’ve got a market growing at 11%, but the affordability issue really starts hitting home because most people’s salaries don’t go up by 8% or 9%,” says Viruly.
Banks have come to the party by not only approving bonds for developers, but also for consumers. Adelaide Steedley, director for the Centre for Affordable Housing Finance in Africa, says banks are starting to understand the risk profile.
“Builders are figuring out how to build properties for this market, with a view of talking to buyers and understanding them. However, the steady access to finance and credit is still a challenge,” Steedley says.
Figures from the department of human settlements peg the country’s housing backlog at more than 2.1 million units.
Article source: http://citizen.co.za/416197/townships-beating-the-burbs/