Township property markets remain more buoyant than suburban ones, according to First National Bank’s (FNB) third quarter Township Property Barometer for 2008.
â€It takes less time to sell a township property and the odds are better that it will fetch the asking price,†FNB property economist John Loos told the Mail and Guardian Online on Tuesday.
Loos said the township market was performing better than the national metropolitan market.
Although township property markets were ”feeling the financial pinch caused by rising inflation, interest rates and a slowing economy, their performance remained significantly better than the suburban markets”, the bank added.
The barometer is a quarterly analysis of residential property market activity and gives the perceptions of 150 estate agents employed by the top estate agencies in South Africa’s major metropolitan areas.
Whereas, on a scale of one to 10, the main FNB Barometer showed suburban estate agents rating demand activity levels at 4,1 in the third quarter, the October survey of townships recorded higher activity ratings of 4,84 in Gauteng, 5,23 in Durban and 5,55 in Cape Town.
More affordable option
”Having been relatively neglected infrastructure- and services-wise under the apartheid government, and having housed the poorest population group, these markets are by and large the cheapest and most affordable,” FNB added.
FNB said that since the 1990s, in a faster growing economy that had become a net job creator, disposable income had grown the fastest among black South Africans.
”[This] should not come as a surprise given this group’s entry into the economy after having been largely excluded in the apartheid era.”
The strong growth in black employment numbers was probably seen in the figure for first time buyers in the townships. With townships being the most affordable, it stood to reason that a very high proportion of total buyers in townships were first-time buyers, with 59% in Gauteng, 50% in Durban and 45% in Cape Town.
Returning to the townships
The townships did not have the national emigration problem of the suburbs, although, interestingly, some emigration had taken place on a small scale, said the bank.
Whereas 20% of sellers in the suburbs were believed to be selling to emigrate in the third quarter, only 1% to 2% of sellers were believed to be doing the same in the townships.
”However, townships have typically had a significant exodus to the more affordable end of the suburban market. The most recent survey, however, suggests that it is not all one-way traffic to the suburbs.”
In Gauteng 31% of township property buyers were believed to be from the suburbs who had wanted to return to the townships. This compared with 24% in Durban and 26% in Cape Town.
”The drivers of this return could be numerous … while cultural factors can play a role in certain cases, a driver may well be the indication that 40% of lower income sellers in the suburban markets are downscaling due to financial pressure, which could suggest that a significant number are downscaling back into the townships.”
However a third partial reason for the flow of buyers back into the townships was believed to be the structural changes taking place there, including infrastructure upgrades and retail developments.
”These developments are making townships more attractive places to live, especially for middle class households who demand quality retail and entertainment.”
The survey showed that the township believed to have the highest percentage of buyers leaving the suburbs was Soweto (38%). This may be coinciding with the rapid pace of retail developments and upgrades in the region.
”The above-mentioned structural changes are expected to play an increasingly important role in township residential performance, as townships follow a similar process to the suburbs of the 1970s in transforming from dormitory towns to mixed-use areas with a diversified economy, greater job creation and thus purchasing power,” FNB said.
Stock shortages
The bank added that many estate agents surveyed indicated a shortage of houses relative to demand, particularly in Durban.
In Gauteng, 31% of respondents reported a shortage relative to demand and 38% in Cape Town. ‘In Durban 68% of agents are reporting stock shortages,†Loos added.
House price inflation for the three major metropolitans’ townships (using Deeds office data) was estimated at 19% year-on-year in the third quarter.
This compared well with the FNB National House Price Index inflation rate of 3,3% for the same quarter.
Split up into the three regions, the Durban township house price inflation rate was estimated at 40% year-on-year for the third quarter. This was well above the 18,4% and 7,4% for Gauteng and Western Cape townships respectively.