Township housing outperforms suburbs

Private Property South Africa
Tahir Desai

town1Areas that were classified as “Black Township Areas” under apartheid era legislation outperformed the Major Metro Residential Market in 2014, according to the FNB Property Barometer.

In 2014, the FNB House Price Index for areas formerly classified as “Black Townships” in the 6 Major Metro regions rose by 9.5%. This is up from 6.5% in 2013, and was higher than the overall Major Metro Regions House Price Index (Ethekwini, Cape Town, Nelson Mandela Bay, Ekurhuleni, Joburg and Tshwane) growth rate of 6.8%.

The former townships, remain the most affordable areas of the market with an average house price of around R304, 000 for 2014.

There are 2 main reasons for these areas outperforming suburbs; a higher percentage of first time buyers and a deterioration in residential affordability.

First Time Buyers

According to the FNB Estate Agent Survey, the percentage of first time buyers rose to 25%. Due to limited finances many of these buyers start off in the more affordable segment of the market like the former townships.

Residential Affordability

FNB Affordability Ratios showed a deterioration of residential affordability due to house price growth exceeding average employee remuneration and the interest rates hike.

This may well cause buyers to increasingly search for affordability over time, and that in turn would arguably benefit the Former Township areas to a greater degree than others.

In short, affordability may be starting to become an increasing priority as the overall residential market strengthens, and this may play into the hands of Former Township Markets, driving mildly superior house price inflation of late.

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