Township property booming

Johannesburg - While former white suburbs are experiencing the worst housing slump in 15 years, township buyers now have to pay 20% more for the average house than a year ago, a new FNB report shows.

The bank launched its first Township Property Barometer earlier on Monday, confirming that SA's township housing markets are generally still in much better shape than those of their suburban counterparts.

The report shows that township house price inflation in the three major metro regions (Gauteng, eThekwini and the Western Cape) averaged 19.7% year-on-year in the third quarter. That compares to house price growth of only 3.3% for traditional white suburbs over the same time, as measured by FNB's national house price index.

Split up into the three regions, Durban townships recorded the strongest price growth with an estimated 40% inflation year-on-year for the third quarter. That is well above the 18.4% and 7.4% recorded for Gauteng and Western Cape townships respectively.

FNB Home Loans property strategist John Loos cites a number of reasons for the double-digit price growth still seen in most townships. He says affordability plays a key role. "Having been relatively neglected in the past as far as infrastructure and service provision is concerned, these areas are by and large the cheapest places in which South Africans can buy property today."

The strong growth in black employment numbers and disposable income has seen a strong surge in first-time buyers in the townships. Loos says the proportion of housing sales going to first-time buyers in townships is believed to be 59% in Gauteng, 50% in Durban and 45% in Cape Town. This compares to only 12% of total sales going to first-time buyers in former white suburbs.

Loos says there is also growing evidence that black buyers, who migrated to former white suburbs over the past decade, are returning to townships. He says this could be due to structural changes taking place in the townships, including infrastructure upgrades and shopping centre developments.

Says Loos: "These developments are turning townships into more attractive places to live, especially for middle class households who demand access to quality retail and entertainment."

However, township property markets have not been left entirely unscathed by higher interest rates, tighter credit lending and a slowing economy. Loos says although house price growth has kept up well in townships, demand levels are no longer "overly impressive". He believes stock shortages, as opposed to continued growth in demand, may be playing a key role in sustaining double-digit house price inflation in townships.

Loos says demand for township housing is already slowing, as lower-income households start to feel the pinch. In Gauteng townships alone it is believed that up to 44% of sellers are offloading their homes because they need to downscale.

- Fin24.com