TOP BOOST FOR TOWNSHIPS

While property prices in traditional suburban areas are ailing, they are in a sound state of health elsewhere

SOUTH AFRICA’S township areas may not come to buyers’ minds when looking for good returns on property investments; perhaps they should.

This is because house price growth in many of these areas is outperforming that of many traditional city suburbs, and has been doing so for years.

Furthermore, demand for properties in townships, primarily those close to major urban areas, is outstripping supply.

FNB’s five-year property trends data, from 2014 to 2018, shows prices in townships in and around metros generally outperform their suburban counterparts. The bank’s economist Siphamandla Mkhwanazi says this appears to be a common theme across all major metros.

In the City of Cape Town overall, data shows property prices in this period increased by about 70%. The Atlantic seaboard saw price growth of about 105%, the City Bowl about 90%, and the eastern suburbs about 80%. However, areas FNB classifies as “former black township regions”, including Gugulethu and Khayelitsha, saw price growth of 132%.

Price growth in Atlantis/Mamre, Mitchells Plan/Eerste Rivier and the Cape Flats was about 83%, 75%, and 70% respectively. This exceeds price inflation in Bellville and surrounds (60%), western seaboard (62%), and southern suburbs (68%).

Mkhwanazi says there are a variety of factors that influence these trends: “The first is the enduring demand that appears to consistently outstrip supply in these areas. The structure of the economy is still metro-concentrated. With inadequate supply of affordable housing in city centres, households often fall back on township dwellings to be as close as possible to economic opportunities.

“It is the combination of high demand and inadequate supply. Related to this is the huge demand for affordable rental space in these densely populated areas.

“Higher income households, and typically those who have superior access to credit markets, purchase properties in these areas and convert them into rental units.”

Mkhwanazi says this has had a “major impact” on property values in townships. Another important factor is that access to credit markets has gradually improved for the average South African.

“This has injected much needed liquidity in those markets and unlocked value (and wealth) for property owners in these areas.”

He says in the City of Cape Town, regional dynamics are also at play, including the strong residual demand from households who were outpriced in the city centres during the boom from 2014 to 2016.

Statistics from bond originator BetterBond show the markets of the 20 biggest townships have seen a steady recovery since July 2018, and especially over the past few months.

BetterBond chief executive Rudi Botha says: “The number of bond applications, having slumped by more than 50% in the second quarter of 2018, has shown a steady recovery since July 2018.”

PICTURE: CHANELLE MANUEL GOING UP Many of the country’s township property markets have seen superior price growth to that in many traditional suburbs.