Ten years after the watershed 1994 election, black buyers are starting to establish a meaningful presence in the real estate market.
Their arrival, with declining interest rates, rising business confidence and other positive economic factors, is expected to bolster the market’s future sustainability.
The relocation of previously disadvantaged buyers to metropolitan areas was initially marked by the purchasing of properties abutting townships.
However, entry-level purchases have now led to large-scale upgrading to other suburbs and better properties during the past three or four years. This is one of the major contributors to the current stock shortage in the property market.
Demand for property is at an all-time high countrywide. This has led to serious upward pressure on prices, which Absa’s research puts at close to 20% year-on-year.
The early trickle of black buyers into the white-dominated property market has become a steady flow, fuelled by an increasingly powerful middle class intent on a better lifestyle and a desire to leave the crime-hit townships.
There are exceptions. Some urban areas remain relatively untouched by emergent market purchasing, among them the northern and southern suburbs of the Cape Peninsula and parts of Pretoria and Durban.
In the Western Cape this is due to ever-increasing prices, which have excluded not only emergent buyers but lower and middle-income brackets as a whole. Large parts of this market now cater predominantly for wealthy local and foreign buyers.
Entry-level houses in Cape Town’s southern suburbs start at about R750 000. The monthly repayments on a R500 000 home loan over 20 years at an interest rate of 12% are about R6 000, making it unaffordable for any family without a gross income of about R20 000 a month.
High prices in the Western Cape’s northern suburbs are also prohibitively high for the average buyer.
On the East Rand emergent market activity is high in areas such as Mayberry Park, Albertsdal and Meyersdal. About 20% of the active market in those suburbs comprises previously disadvantaged buyers in the R150 000 to R200 000 price range.
Meyersdal is the Sandton of Alberton, with prices ranging from R500 000 to R2-million. Emergent buyers, usually doctors, lawyers and owners of township businesses, tend to pay cash for their properties, and the trend has moved away from large homes for extended families. Mostly younger buyers are now purchasing freehold homes for their immediate families only.
Buyers outside Meyersdal tend to go for 100% bonds and costs, effectively translating into 108% bonds.
In Roodepoort and Soweto about 30% of the market comprises previously disadvantaged buyers. Both single people and families from Soweto, Kagiso and Dobsonville target mostly the areas of Witpoortjie, Lindhaven and Groblerpark.
The average purchasing price of these buyers is about R280 000, mainly for freehold properties and using 100% bonds.
Many emergent buyers are not yet conversant with aspects of home ownership. Fearing they could end up homeless, they tend to take a lot of convincing to sell their township homes.
Emergent buyers comprise between 15% and 20% of the market in Nelspruit and White River, with two distinct patterns emerging. At the bottom end, the goal is to find a property in Nelspruit or White River at an affordable price. The average selling price in this market in Nelspruit is around R350 000 and in White River, R300 000. In most cases, the bonds granted are between 100% and 108%.
At the top end of the emergent market status appears to be important. The sector puts down large deposits, avoids flat and thatched roofs, and places an emphasis on gardens.
Not surprisingly, there are teething problems. The implications of signing purchase agreements are often not fully understood, and buyers risk over-paying, as they seldom quibble over price. When selling, home owners from this market often struggle with the sales process and the pricing cycle.
In Louis Trichardt an extraordinary 60% of the market now comprises previously disadvantaged buyers, most coming from rural areas like Venda. Young and old, single and families, they tend to prefer freehold houses in the newer suburbs, with an average purchase price of R300 000.
The impact of emerging buyers in this area has been a serious reduction in available stock.
In Winelands, where the emergent market stands at about 15%, there has been a higher-than-normal rate of repossessions by banks because of a failure keep up with monthly bond repayments and municipal service charges. This has effectively removed much-needed stock from the market, to the detriment of estate agents.
Preferring to buy freehold properties in Paarl East and Denneburg, the price range of the emergent buyers is in the R250 000 to R320 000 range, financed by 100% bonds plus costs. Buyers tend to be families who have rented homes in the past and are finally in a financial position to buy their own homes. Overall activity had pushed property prices up by as much as 33% in the past year.
In KwaZulu-Natal, and more particularly greater Durban, the acute stock shortage has made it extremely difficult for prospective purchasers, especially those from disadvantaged communities, to acquire quality homes at affordable prices.
Agents are frustrated at being unable to satisfy the daily growing numbers of qualified buyers, most of whom have secured pre-approved bonds but cannot find suitable homes.
Even the recent drop in interest rates has given little relief. In fact, increased demand has exacerbated the problem, with more buyers entering the market. Simply put, there are far too many buyers and too few properties.
The obvious solution is the creation of more stock through new housing developments. Sadly, these are few and far between, especially in the average to lower price range, where demand is greatest.
Mike Bester is CEO of the Realty 1 Elk Group. In this article he uses information drawn from Elk franchises countrywide