The residential property market is booming in the townships, where annual house price inflation rose to 39 percent in March this year after hovering below 10 percent before 2003, according to a new report.
The analysis by Lightstone Risk Management of the market in these areas - demarcated as peri-urban residential zones for black people under apartheid - notes that the nature of township transactions has changed significantly since 1994.
A key driver of increased demand in townships is the combined effect of upgrades to township infrastructure and increased economic activity, which has made previously neglected areas more attractive to upwardly mobile buyers.
Dramatic price rises in former white areas in recent years have also forced many buyers to seek more affordable properties in the townships.
Lightstone's analysis says the total number of township property transactions peaked at more than 120,000 a year during 1998 to 1999. It declined to between 40,000 and 50,000 a year in the past three years.
However, the earlier peaks were driven by municipal sales of land to individuals, as the state sought to raise property ownership among previously disadvantaged groups.
The proportion of property sales to individuals by organisations, mainly municipalities, has declined from 66 percent in 2000 to 21 percent this year. At R35,000 the average price of these sales was R165,000 lower than the average sale price between individuals.
The report says sales between individuals have increased from 23 percent of the township market in 2000 to 64 percent this year.
Only 15 percent of property sales were financed by mortgages in 2003, compared with 45 percent this year. The loan value of township mortgages has risen from between 60 percent and 80 percent of the sale price to more than 90 percent this year.
Lightstone's first township residential property index tracks the price of 1.4 million property sales across South Africa back to 2000.
Pam Golding Property reported a capital growth in the sale of township homes of between 30 percent and 40 percent in the year to February. The average selling price was R442 000 in this period.
First National Bank property strategist John Loos, a co-author of the report, said yesterday that the township market was coming off a low base but price inflation as at March was accelerating, while the national market had been decelerating.
Loos said the impressive performance was driven by mounting affordability issues in the former white areas, as well as upgrades to township infrastructure that would transform these dormitory towns into more mixed-use economies.
What made this market's strength even more impressive was that many upwardly mobile people were still leaving the townships for the more affordable former white areas.
Between 2000 and 2007, the report says, 54 percent of sellers moved to affordable or mid-value housing areas outside the townships, which points favourably towards sustaining the long-term house price inflation for middle-class properties. By contrast, only 0.5 percent of township sellers moved into areas with an average house price above R700 000, it says.
Loos said the sustainability of township demand, despite significant numbers of people moving out of these areas, appeared to reflect solid economic growth on one hand and a relative shortage of new stock on the other. - Business Report
The analysis by Lightstone Risk Management of the market in these areas - demarcated as peri-urban residential zones for black people under apartheid - notes that the nature of township transactions has changed significantly since 1994.
A key driver of increased demand in townships is the combined effect of upgrades to township infrastructure and increased economic activity, which has made previously neglected areas more attractive to upwardly mobile buyers.
Dramatic price rises in former white areas in recent years have also forced many buyers to seek more affordable properties in the townships.
Lightstone's analysis says the total number of township property transactions peaked at more than 120,000 a year during 1998 to 1999. It declined to between 40,000 and 50,000 a year in the past three years.
However, the earlier peaks were driven by municipal sales of land to individuals, as the state sought to raise property ownership among previously disadvantaged groups.
The proportion of property sales to individuals by organisations, mainly municipalities, has declined from 66 percent in 2000 to 21 percent this year. At R35,000 the average price of these sales was R165,000 lower than the average sale price between individuals.
The report says sales between individuals have increased from 23 percent of the township market in 2000 to 64 percent this year.
Only 15 percent of property sales were financed by mortgages in 2003, compared with 45 percent this year. The loan value of township mortgages has risen from between 60 percent and 80 percent of the sale price to more than 90 percent this year.
Lightstone's first township residential property index tracks the price of 1.4 million property sales across South Africa back to 2000.
Pam Golding Property reported a capital growth in the sale of township homes of between 30 percent and 40 percent in the year to February. The average selling price was R442 000 in this period.
First National Bank property strategist John Loos, a co-author of the report, said yesterday that the township market was coming off a low base but price inflation as at March was accelerating, while the national market had been decelerating.
Loos said the impressive performance was driven by mounting affordability issues in the former white areas, as well as upgrades to township infrastructure that would transform these dormitory towns into more mixed-use economies.
What made this market's strength even more impressive was that many upwardly mobile people were still leaving the townships for the more affordable former white areas.
Between 2000 and 2007, the report says, 54 percent of sellers moved to affordable or mid-value housing areas outside the townships, which points favourably towards sustaining the long-term house price inflation for middle-class properties. By contrast, only 0.5 percent of township sellers moved into areas with an average house price above R700 000, it says.
Loos said the sustainability of township demand, despite significant numbers of people moving out of these areas, appeared to reflect solid economic growth on one hand and a relative shortage of new stock on the other. - Business Report
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