Homes val­ued well un­der R1 mil­lion are out­per­form­ing every other sec­tor in the prop­erty mar­ket

Weekend Argus (Saturday Edition) - - PROPERTY360 - BONNY FOURIE bron­

HOUS­ING in the af­ford­able sec­tor is out­per­form­ing the rest as it in­creas­ingly at­tracts buy­ers scal­ing both up and down, anal­y­sis from Light­stone has re­vealed.

An eval­u­a­tion of 8 mil­lion prop­er­ties in the coun­try showed that homes in this sec­tor – val­ued at R700 000 or less – make up just over 71% of the to­tal vol­ume of prop­er­ties in South Africa. With its grow­ing ap­peal, this fig­ure could rise as more de­vel­op­ers re­alise its po­ten­tial.

While the ma­jor­ity of the prop­erty mar­ket is grow­ing “at a sta­ble rate”, Light­stone an­a­lyt­ics di­rec­tor PaulRoux de Kock says the af­ford­able mar­ket, of which 94.2% of homes are free­hold, is in “a dual pres­sure sys­tem”.

“On the one hand we see po­ten­tial buy­ers mov­ing from the in­for­mal sec­tor to the for­mal sec­tor, and on the other hand, peo­ple are down­scal­ing and drop­ping back into the af­ford­able mar­ket, pos­si­bly be­cause of the shrink­ing econ­omy.”

Po­ten­tial buy­ers are look­ing at for­mal mar­kets de­vel­op­ing around in­for­mal set­tle­ments to ob­tain value for money and de­vel­op­ers are meet­ing the de­mand, he says.

“What we find in­ter­est­ing about the af­ford­able mar­ket is that parts of this seg­ment grow so rapidly that it could quickly be re­clas­si­fied into a mid­dle or high-end value seg­ment.”

De­vel­op­ers have re­sponded pos­i­tively to­wards all mar­kets and there has been a “sig­nif­i­cant spike” in new prop­er­ties reg­is­tered in the low value band, De Kock says.

Light­stone says there is a trend for peo­ple to down­grade due to fi­nan­cial stress, and re­sults from FNB’s lat­est Es­tate Agent Home Sell­ing Sur­vey show fi­nan­cial stress-re­lated sell­ing is con­tin­u­ing. In the third quar­ter of this year ( July to Septem­ber), 16.3% of sellers did so to down­scale due to fi­nan­cial pres­sure. This is an in­crease from 15% in the pre­vi­ous quar­ter (April to June) and “no­tice­ably higher” than the 11% low in the third quar­ter of 2015, says FNB prop­erty econ­o­mist John Loos.

“How­ever, this per­cent­age does re­main mod­er­ate com­pared to the 34% high reached in the sec­ond quar­ter of 2009.”

The es­ti­mated per­cent­age of those in­tend­ing to “rent down” as op­posed to “buy down” has in­creased from 40% in the first quar­ter of 2017 to 65.6% in the third quar­ter of 2018.

“Rental is of­ten the cheaper and lower cash flow risk op­tion. A rise in the per­cent­age in­tend­ing to ‘rent down’ rather than ‘buy down’ points to a de­crease in con­fi­dence among this group of fi­nan­cially pres­sured sellers,” Loos says.


BUY­ING UP AND DOWN Prop­er­ties in the af­ford­able hous­ing cat­e­gory, like this home in Soweto, are be­com­ing more pop­u­lar with buy­ers up­grad­ing from the in­for­mal prop­erty sec­tor, and those in the for­mal sec­tor who are down­grad­ing. |

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