DOWN AFFORDABILITY TAKES LEAD
Homes valued well under R1 million are outperforming every other sector in the property market
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. |