Buying a home close to work ‘but a dream’

Middle-income earners can’t afford properties in well-located suburbs

OWNING a home in well-located area is “but a dream” for many of South Africa’s 4.2 million middle-income earners, who can afford to live only in the outer suburbs, far from the economic hubs where many of them work.

This is according to Jacques van Embden, the managing director of property development brand Blok.

Van Embden said there was a pressing need for lending institutions and property developers to enable South Africa’s emerging middle-income market to enter the urban property market.

According to research by property analytics group Lightstone, the inability of middle-income buyers to afford to live close to economic hubs was particularly true in cities such as Cape Town, where property prices made it difficult for them to find a decent home for under R3 million.

“It’s not surprising then that FNB’s latest Property Barometer found that there are five times fewer first-time home buyers in the Mother City than in other urban cities,” Van Embden said.

“With the 2017 Sanlam Benchmark Survey revealing that more than 70% of middle-class workers experience some form of financial stress, who in this market can afford to purchase property?”

He said areas where middle-income earners could afford to live included, at the lower end of the spectrum, Parow Central in the Western Cape, Reiger Park in Gauteng and Shastri in KwaZulu-Natal, and, at the upper end, Lonehill in Gauteng, Durbanville in the Western Cape and Waterfall in KwaZulu-Natal. In these areas, middle-income earners could afford the minimum purchase price of R500 000 and the maximum price of R1.5m if the property was financed over 20 years, he said.

The monthly household income of middle-income earners meant they did not qualify for government housing subsidies (provided to those who earned between R3 501 and R15 000 a month), Van Embden said. However, a number of banks and mortgage finance providers were addressing this need by enabling those who earned between R15 000 and R25 000 month, depending on the lending institution, to obtain mortgage bonds, he said.

SA Home Loans, South Africa’s largest non-bank specialist home loan provider, catered to people who earned less than R18 000 by providing 100% loans to qualifying customers over a 20-year term at a variable interest rate, he said.

Van Embden said Old Mutual’s Housing Impact Fund financed the acquisition and construction of homes that were affordable for the lower and middle markets. As part of this, the investment group had developed an income-linked residential mortgage loan that aligned annual loan repayment escalations with increases in borrowers’ salaries. The loan was aimed at those with monthly salaries of between R3 500 and R20 000 and properties priced from R200 000 to R550 000.

Meanwhile, Charlton Williams, Pam Golding Properties’ area principal in Athlone, Belhar and Goodwood, said affordability, family ties and strong community bonds kept Athlone in demand among home-buyers.

“Generally, we find that many of those buying homes in Athlone are families upgrading from, for example, Belgravia or Surrey Estate to a location such as Crawford, while in the case of first-time buyers, who purchase across a broad cross-section of suburbs, it’s mainly because of family ties, area knowledge, and their desire to remain here,” Williams said.