Affordable Land and Housing Data Centre Understanding the dynamics that shape the affordable land and housing market in South Africa. Filling the Gaps: Affordable and other housing markets in Johannesburg: Active, Accessible, Diverse September, 2012 DRAFT FOR REVIEW
Presentation overview 2 1. Introduction 2. Market Size 3. Market Potential 4. Market Dynamics 5. Comparison to other Metropolitan Municipalities 6. Conclusions
3 Introduction This report provides a profile of affordable and other housing markets in the City of Johannesburg The affordable housing market comprises residential properties whose value is less than R 500 000 and is acquired by households earning less than about R15,000 a month The importance of the affordable housing market in South Africa cannot be overstated - of the 6 million residential properties on the South African Deeds Registry, over half (3,4 million, or 58%) are valued at less than R500 000. The type of housing in the affordable housing market includes: existing stock found in the former Black, Coloured and Indian townships, government subsidized housing, and, to a lesser extent, new housing developed by the private sector. There is increasing recognition that the affordable housing market forms an important component of South Africa s economy
4 Methodology This report sets out the findings of an analysis of data from the South African Deed Registry, together with data on South Africa s National Subsidy Programme The analysis uses specific indicators of the formal real estate market to describe current conditions in the affordable market, and compares them to the rest of the metropolitan area and to the nation as a whole. A categorisation of affordable housing properties and suburbs is used: An affordable housing property is any property valued below R500,000 that can be acquired by a family or household earning less than R 15 000. An affordable suburb is a neighbourhood with an identifiable name and recognized boundaries in which the average worth of the residential properties within it is less than or equal to R 500 000. Analysing the affordable housing market in South Africa is challenging on several fronts: The affordable market is thinner than other markets and Information within the market is limited Anecdotal information indicates that there are informal transactions that occur within the market that are not recorded through the deeds registry.
5 Methodology cont. All of the data analysed in this presentation was drawn from the South African Deeds Registry at the end of 2010 unless otherwise noted. The data is analysed in terms of three areas of focus: 1) Market size 2) Market potential 3) Market dynamics The data is analysed using two dimensions: 1) Property value: The following categories are specified: Less then R250,000 R251,000 to R500,000 More than R500,000 2) Area: The following categories are specified: Affordable areas in the city The city as a whole National
Presentation overview 6 1. Introduction 2. Market Size 3. Market Potential 4. Market Dynamics 5. Comparison to other Metropolitan Municipalities 6. Conclusions
7 Determining market size The key dimensions that measure market size are: The total number of registered residential properties in the market The worth of registered residential properties in the market The extent to which these properties are being traded (i.e. bought and sold) Where the properties are located Who owns them and the type of ownership
Value of registered properties 8 Value of properties Affordable areas in Joburg Joburg : All properties National: All properties < R250 000 R7,719,495,000 98% of metro in category R7,862,270,000 5% of national in category R146,580,735,000 R251 000-500 000 R53,727,010,000 84% R63,731,530,000 16% R398,211,440,000 > R500 000 R15,889,860,000 3% R489,188,740,000 19% R2,624,765,870,000 Total 77,336,365,000 R560,782,540,000 R3,169,558,045,000 Percent of area 14% 18% Source: SA Deeds Registry, 2010 Residential properties in South Africa are valued at R3,169 billion The properties within Johannesburg are valued at R560 billion; although the city has an estimated 9% of the country s population, it contains 18% of the country s residential real estate value, almost twice its proportional weight Properties in affordable areas are valued at R77 billion or just 14% of the total value of residential properties in the city 98% of properties below the value of R250,000 are located in affordable areas which indicates a high concentration of affordable properties in these areas
9 Number of registered properties 13% (700,000) of South African residential properties are located in Johannesburg Just under half (48%) of these are located in affordable areas 32% of affordable properties are of unknown worth these are assumed to be predominantly subsidy properties as they are often registered as having no or minimal value Value of properties Affordable areas in Joburg < R250 000 58 109 17% of affordable areas R251 000-500 000 148 574 44% > R500 000 24 587 7% Unknown worth 107 192 32% Joburg : All properties 58 854 8% of all properties 171 589 24% 355 874 51% 115,051 16% National: All properties 1 141 801 1 052 949 2 200 071 1 182 071 Total 338 462 701 368 5 576 892* Percent 48% 13% Source: SA Deeds Registry, 2010 * While there are 6 million residential properties in the Deeds Registry approximately 400,000 of them do not have GIS coordinates or addresses and therefore could not be used in this analysis.
10 Value of properties Residential property values Affordable areas in Joburg Average worth % of metro average Joburg : All properties Average worth % of national average National: All properties Average worth < R250,000 132,845 101 133,589 102 131,439 R251,000-500,000 361,618 96 371,420 99 375,628 > R500,000 646,271 50 1,374,612 107 1,290,364 Total 256,706 31 830,751 149 558,484 Source: SA Deeds Registry, 2010 There is a wide value gap Johannesburg s average residential property (R831,000) exceeds the national average by 1.5 times The average residential property in affordable suburbs (R257,000) is onethird the city s average value, and half the nation s, indicating a wide value gap.
11 Price of properties Sales transactions Affordable areas in Joburg Number Value (Rm) Number Joburg : All properties Value (Rm) Number National: All properties Value (Rm) < R250,000 8,744 174 10,096 512 61,286 4,838 R251,000-500,000 2,352 381 5,463 2,162 40,579 15,654 > R500,000 588 246 19,146 31,128 101,740 147,636 Total 11,684 801 34,705 33,802 203,605 168,128 Percent 34% 2% 17% 20% Source: SA Deeds Registry, 2010 Johannesburg s affordable market is active: Properties sold in Johannesburg comprise 20% of the number of properties sold in South Africa as a whole and 17% of the total sales value Affordable properties were over one third (34%) of all properties sold in Johannesburg in 2010 this indicates sizable formal market activity in these areas Of the properties sold in affordable suburbs, 75% were valued below R250 000, which indicates some product availability in the lowest end of the housing market
12 Residential sales prices Sales price of properties Affordable areas in Joburg Joburg : All properties National: All properties Average price % of national average Average price % of national average Average price < R250,000 71,126 102 75,660 109 69,690 R251,000-500,000 371,035 99 395,611 106 372,949 > R500,000 1,381,812 75 1,501,746 82 1,841,133 Total 222,346 42 713,807 136 525,173 Source: SA Deeds Registry, 2010 While there is an overall disconnect between prices and values Johannesburg s average property prices are almost 1,5 times the national average, yet 15% below the metro s average property value (R831,000), indicating perhaps a softening housing market; Affordable areas reflect the same dynamic - average property prices in affordable suburbs (R222,000) are also 15% less than the comparable area s average property values (R257,000) Average property prices below R250,000 in affordable areas (R 71,000) are about half their average worth (R133,000). This undervaluing may indicate weak demand, fewer transactions with which to support higher prices or constraints on credit.
13 Value of properties Affordable areas in Joburg Number New registrations Value (Rm) Number Joburg : All properties Value (Rm) National: All properties Number Value (Rm) < R250,000 1,291 152 2,294 155 23,633 2,221 R251,000-500,000 3,430 1,284 3,918 1,489 18,012 6,786 > R500,000 330 236 3,786 4,950 21,912 27,338 Unknown worth 6,233 na 6,491 na 28,622 na Total 11,284 1,672 16,489 6,593 92,179 36,345 % of total 68% 25% 18% 18% Source: SA Deeds Registry, 2010 Johannesburg s affordable markets are expanding faster than the overall market: Johannesburg added16 500 new registrations in 2010, about 2% of its existing stock Over two-thirds (68%) were located within affordable suburbs, likely 95% of which were worth under R 500 000, indicating growth in the lower end of the market, and expanding opportunities for lower income households to obtain formal homeownership (the 55% of unknown worth is most likely government sponsored housing worth below R 250 000).
Location of affordable suburbs 14 Johannesburg s affordable suburbs are moderately well-located The map reflects the distribution of predominantly residential suburbs by average property value Johannesburg's affordable suburbs are predominantly concentrated in the former Black, Indian and Coloured townships There are a few affordable suburbs which are well located near the inner city, near jobs and transit, boosting the housing market Johannesburg affordable suburbs, 2011 There are a significant number of suburbs in Soweto that do not fall in the affordable market or have property values between R250,000 and R500,000, likely due to their preferable location
Access to amenities of affordable suburbs 15 Despite the fact that many affordable suburbs occur on the periphery, they appear to be adequately serviced by public sector and cultural amenities, such as transit stops, schools and health centres and privatesector amenities such as financial, employment and retail centres Centrally located affordable properties bolster property values Affordable suburbs access to amenities, 2011
16 Owner type Affordable areas in Joburg Number Property ownership % of affordable areas Joburg : All properties Number % of Joburg all properties Number National: All properties % of national all properties Individual 326,804 97 643,364 92 5,212,161 92 Company or organisation 11,362 3 54,079 9 440,946 8 Bank 444 0 936 0 6,014 0 Total 338,610 100 698,379 100 5,659,121 100 Source: SA Deeds Registry, 2010 The vast majority of properties in affordable suburbs, Johannesburg and nationally are owned by individuals - individual ownership is slightly higher in affordable areas A slightly higher proportion are held by corporations or other organizations (like governments, trusts or rental housing stock) in the City of Johannesburg and South Africa than in affordable suburbs. Bank-owned properties (such as foreclosures) are negligible in all three areas
17 Ownership type Ownership type Affordable areas in Joburg Joburg : All properties National: All properties Number % of affordable areas Number % of all Joburg properties Number % of all national properties Freehold title 307,787 91 499,699 71 4,698,479 84 Sectional title 30,255 8 154,329 22 669,753 12 Estate 420 1 47,340 7 208,660 4 Total 338,463 100 701,369 100 5,576,895 100 Source: SA Deeds Registry, 2010 Properties in affordable areas are 20% more likely to be held in freehold title (71% to 91% overall) The metro overall is three times more likely to be held in sectional title ownership than affordable areas (22% overall to only 8% in affordable suburbs) The high rate of freehold title in affordable areas provides two important assets equity and choice- to existing owners if and as new housing opportunities come available
Presentation overview 18 1. Introduction 2. Market Size 3. Market Potential 4. Market Dynamics 5. Comparison to other Metropolitan Municipalities 6. Conclusions
19 Determining market potential Market potential determines the extent to which a property is a valuable asset or not measured by: Lending rates Housing equity and indebtedness. This is measured through loan-to-value which is the relationship between the outstanding debt collateralized by a property in respect of a bond over the property and the property worth (or value ), usually presented as a percentage Average churn rates which reflects the rate in which properties are bought and sold within a period of time Affordability which reflects local earning potential, and can be defined by the degree to which local incomes can afford local housing.
Private Institutional investment 20 Type of Lenders Large commercial lenders Affordable areas in Joburg Number 75,526 92% Mid tier lenders 6,304 8% Value (Rm) 16,744 94% 1,036 6% Number Joburg: All properties 304,306 93% 21,602 7% Value (Rm) 185,476 90% 21,588 10% Number National: All properties 1,830,459 91% 164,465 8% Value (Rm) 879,799 91% 82,391 9% Other investors 167 17,073 696 213 205,310 42,280 Total loan volume 81,997 17,798 326,604 207,277 2,006,971 963,303 % of total 25% 9% 16% 22% Source: SA Deeds Registry, 2010 In Johannesburg less than 10% of the total loan value is invested in affordable areas (8.6%), about half the average rate of all metros (17%), yet affordable areas represent over 25% of the loan production, less than the average of all metros (37%) Overall, large commercial lenders share over 90% of the entire market; Johannesburg s affordable areas show a slightly higher production level than the city overall (94% and 90% respectively) Mid-tier lenders have a higher market share in the broader residential lending market than affordable areas (10% to 5.8%) and nationally 8%
21 Government investment Location of subsidised housing About 136 000 registered subsidized units have been built in Johannesburg since 1994, or about 20% of the total number of subsidised stock registered nationally, and is slightly higher than its share of residential properties nationally (18%). This investment comprises about 19% of the city s registered housing stock, subsidized or not (it is noted that a significant number of subsidised housing units have not been registered) In the areas where government housing is less clustered, the investment provides significant equity and leverage opportunities, depending on the level of market vibrancy. Clustering government housing constrains flexibility and distorts prices in some contexts. Diversifying these clusters can be a key strategy towards diluting these effects
Leverage potential in affordable areas 22 Lower loan to values, lower bond rates and above average property values in Johannesburg s affordable areas represents opportunity to access more investment Johannesburg s overall loan to value is about 5% higher than the national average of 48%. Its affordable areas are 2% below the national average. To compare investment opportunity more equitably, loan to values are calculated using the entire value of all properties within the area, bonded or not, due to lower bond rates in affordable areas. Affordable areas lower loan to values reflects the lower loan amounts generally available and/or increasing property values (deeper analysis required to confirm which factor affects the difference more) While properties in Johannesburg are about 9% more likely to have a bond than the rest of the country, affordable areas are 15% less likely to have a bond, and 24% less likely to have a bond than the city as a whole Lower loan to values and lower bond rates mean residents have more equity, and increased purchasing power in which to invest in new housing opportunities. Leverage Affordable areas in Joburg Joburg : All properties National: All properties Average loan to value 46% 52% 48% % of sales that are bonded 34% 58% 49% Source: SA Deeds Registry, 2010
23 Affordability Affordability spectrum Johannesburg All metros National: All properties Monthly payment on average home R6,544 5,440 R4,815 Average monthly income available for mortgage R1,526 1,289 R846 Affordability index 4.29 4.22 5.69 Affordability Target R165,994 R140,265 R92,040 Percent of existing average home price 23% 24% 18% Source: SA Deeds Registry, 2010 In Johannesburg, the average household income can afford a property worth R 166 000, which is about one-quarter of the cost of its average property. Johannesburg s affordability index is 4.29 this means it takes just over four times the average income to afford the average house in the city. This affordability index is lower than the national index, indicating that Johannesburg has relatively better affordability than the country as a whole, likely due to higher income potential. Residential properties in metropolitan municipalities overall are slightly more affordable than the rest of the country, probably because of their higher earning potential and greater housing options, with an Affordability Index of 4.2.
24 Churn Property value Affordable areas in Joburg Joburg : All properties National: All properties < R250,000 0.59% 0.59% 0.90% R251,000-500,000 0.76% 0.74% 1.28% > R500,000 2.70% 3.55% 3.23% Unknown worth 0.20% 0.20% 0.55% Source: SA Deeds Registry, 2010 Churn is lower for affordable properties and within affordable areas Churn rates the percent of properties sold within a year - in affordable suburbs and for properties below R500 000 in Johannesburg were below national rates in 2010; this may reflect pent-up demand due to limited product availability, limited access to capital or verifiable income; it may be that higher levels of informality make sales transactions invisible, or other factors. Churn rates in Johannesburg for properties above R500 000 are above the national rate, the only above-average property type Areas of greater development potential can be revealed through a closer look at churn rates across and within suburbs to find areas of hidden development potential.
Presentation overview 25 1. Introduction 2. Market Size 3. Market Potential 4. Market Dynamics 5. Comparison to other Metropolitan Municipalities 6. Conclusions
26 Determining market dynamics The key dimensions that measure market dynamics are: Change in market size reflected through an analysis of new housing stock (registrations) and sales volume Change in market potential reflected through an analysis of sales transfer and lending rates
27 New housing stock Johannesburg s affordable areas have grown more in the period than housing markets in the City of Johannesburg as a whole and nationally New registrations below R 250 000 were 4% of the total in 2007; by 2010, it tripled to 14% of the total New registrations for properties over R 250 000 have dropped steadily over the period but grew for properties worth less than R250,000 between 2007 2008 and 2009 2010. There has been a significant increase in housing stock registered without a value and this stock is located predominantly in affordable areas. The lack of a related increase in sales within these areas strongly suggests that these are newly registered existing subsidised residential properties.
Residential properties added per year 28 The affordable market as a percent of new registrations has grown considerably over the past four years primarily due to declines in the upper markets Over the past four years, the affordable homes proportion of the market has grown by 5%, the same proportionate share lost by residential properties added worth over R500 000 The value of residential stock added to the Deeds Registry per year has dropped twothirds from just over R 100 billion in 2007 to R 35 billion in 2010, largely as a function of the economic downturn. Within Johannesburg, consistent with the country as a whole, new residential property values added has dropped 65% since 2007 as well, from an estimated R 19 billion to R 6.5 billion in 2010. Steady production and values over time makes projecting market conditions easier
29 Growth of affordable markets The percentage of the total value of new properties added in Johannesburg s affordable areas has expanded faster than Johannesburg, and other metropolitan affordable areas. In 2007, the value of Johannesburg s share of the nation s housing and its affordable properties were both about 20% of each market. By 2010, Johannesburg s national market share had dropped slightly to 18%, while its affordable areas had grown to 25% of the city s total market. Over the same period, the market share of those properties over R 500 000 added to the registry in Johannesburg has dropped from almost half to about one-third from 2007 to 2010.
30 Sales per year Sales within price bands followed similar trends, as affordable areas held or grew their market share of sales. In 2007, Johannesburg had 48 000 sales; in 2010, there were 34 000, a 28% drop due in large part to changing economic conditions In 2007, about 40% of the total sales that year were worth R 500 000 or less. In 2010, despite the slump, almost 45% of the total sales were under R 500 000. Despite a drop over the period, the number of low and mid-priced property sales constitute a significant proportion of the real estate market in the city Over the past four years, the total value of sales priced less than R 500 000 showed more stability and less volatility, despite being a small portion of the overall market, which makes projections within these market bands more reliable. This is an important consideration when trying to anticipate the future value or pace of sales within large scale affordable housing developments over several years
31 Change in sales volume Affordable areas experienced the greatest increase in sales volume There has been a growth in residential properties sold between 2008 and 2010. This reflects general growth across the country, despite the reduction in property registrations overall. In 2010, the growth in sales within affordable areas in Johannesburg surpassed all other markets, including Johannesburg overall, other metros and the country.
32 Average sales prices Affordable properties hold their value In the lower sales price bands, average sales prices have remained more stable in more affordable price bands, providing a greater ability to predict where values will be over time. Higher priced sales are more influenced by external economic conditions. From a lender s perspective, stable housing values improve the security of the loan collateral, and reduces risk. From a developer s perspective stability in lower income average prices reduces the perceived risk of development in these markets, in terms of price, profit, demand and timing. Overall, considering the drop in higher end sales volumes locally and nationally, it is important to note that sales prices have been averaged across significantly fewer properties. Values, sales prices and sales volumes in affordable areas by contrast are much more consistent across the period
33 Lending Despite market growth, lending within affordable areas follows or lags overall market trends Over the past four years, lending rates within Johannesburg remained above the national average, and above the rates of all metropolitan areas, but were consistent with other metropolitan area trends and the country as a whole. Lending rates within affordable areas across the country lagged as a whole, particularly as lending rebounded, but was consistent with trends in other areas. Lending within these areas behaves similarly to regular market trends.
34 Churn Generally, rates of churn in affordable areas are below area averages. Churn rates among houses worth more than R 500 000 are much higher than homes worth less than R 500 000. A low and long term churn rate might not just reflect lack of market demand, but may also reflect lack of adequate affordable opportunities up the housing ladder in which to move, limited access to credit in an area, or, as in Johannesburg affordable areas, sales prices lower than property values Lower churn implies greater social cohesion, an important consideration when assessing ability to pay.
Presentation overview 35 1. Introduction 2. Market Size 3. Market Potential 4. Market Dynamics 5. Comparison to other Metropolitan Municipalities 6. Conclusions
36 Market size Market Size Total number of registered properties as a percentage of national registered properties Total number of registered properties below R500,000 in value, as a percentage of national registered properties Percent of affordable suburbs to total metro suburbs Joburg Cape Town Tshwane Ekurhuleni Ethekwini NMB Mangaung BC Msunduzi 13 12 9 9 8 4 2 2 1 21 22 17 20 19 11 4 4 3 40% 41% 44% 58% 71% 57% 69% 68% 66% Johannesburg s property market is the largest in the country. The metro s percent of affordable suburbs is the lowest among all other metros, likely due to higher property prices in the metro, and less concentration of affordable properties.
Concentration 37 Concentration of Affordable Properties Percent of properties below R500 000 within affordable areas Percent of properties above R500 000 within affordable areas Percent of properties of unknown worth in affordable areas Percent of new registrations of properties below R500 000 in affordable areas Percent of properties within the metro identified as govt sponsored Total property values in affordable areas as a percentage of total metro property values Percent of all metro loans within affordable areas Joburg Cape Town Tshwane Ekurhuleni Johannesburg s affordable properties are less concentrated than most. It has: the 2 nd lowest percentage of properties below R500,000 in affordable areas, and the lowest concentration among all major metros (however, it has a very high level of properties of unknown worth in affordable areas, likely to be government properties worth less than R500 000). the 2 nd lowest rate of newly registered affordable properties within affordable areas, and 10% below the metro average Below-average percent of property value within its affordable areas (despite above-average values) The lowest lending rate within affordable areas of all other metros Ethekwini NMB Mangaung BC Msunduzi 61 79 77 68 78 78 43 70 77 70 7 10 7 6 10 6 4 9 12 8 32 11 16 27 12 16 53 21 12 22 76 95 85 79 90 93 87 98 66 85 19 21 15 28 22 42 29 30 20 25 14 12 19 23 26 29 27 31 34 24 AVG 25 31 26 30 45 44 41 45 43 37
Market Potential 38 Market Potential Joburg Cape Town Tshwane Ekurhuleni Johannesburg presents some interesting affordable housing opportunities: Sales prices in Johannesburg's affordable areas are above average, but in the mid-range of large metros Churn in Johannesburg s affordable areas is the 2 nd lowest of all metros Johannesburg s below-average affordability index implies incomes may support mid-range prices The rate of bonded sales in affordable areas is the 2 nd lowest of all metros, combined with low churn and above average worth, suggests lending opportunities might be overlooked Ethekwini NMB Mangaung BC Msunduzi Percent of national average worth 1.49 1.65 1.22 0.96 1.16 0.81 0.57 0.77 0.94 1.06 Average sales price in affordable areas as a percentage of the national average sales price Churn in affordable suburbs for properties below R250 000 Churn in affordable suburbs for properties between R250 001 - R500 000 Churn in affordable suburbs for properties above R500 000 42 43 43 32 47 39 36 28 32 38 AVG 0.59 0.94 0.52 0.31 1.32 1.56 1.79 1.5 1.37 1.10 0.76 1.78 1.09 0.67 1.95 2.16 2.62 1.57 2.18 1.64 2.7 3.53 3.31 3.01 3.51 3.99 4.16 5.19 3.14 3.62 Percent of bonded sales 58 52 60 66 55 48 48 49 58 55 Percent of bonded sales in affordable areas 34 38 44 62 46 38 33 46 55 44 Affordability Index 4.29 4.69 2.91 3.84 7.13 5.11 3.15 4.66 4.89 4.52 Average Loan to Value of affordable areas 46 42 41 41 33 39 45 45 36 41
Presentation overview 39 1. Introduction 2. Market Size 3. Market Potential 4. Market Dynamics 5. Comparison to other Metropolitan Municipalities 6. Conclusions
40 Conclusions Johannesburg s affordable market is very active During 2010, one-third of the 35,000 properties sold in Johannesburg were in affordable suburbs, indicating measureable formal market activity in these areas. Of the properties sold in affordable suburbs, 75% were valued below R250 000. This indicates some product availability in the lowest end of the housing market. Although new registrations have dropped over the past four years, in 2010, about 68% of Johannesburg s17,000 new registrations were in affordable suburbs. This indicates expanding opportunities for lower income households to advance up the economic ladder through formal homeownership. In 2010, the growth in sales within affordable areas in Johannesburg surpassed all other markets, including Johannesburg overall, other metros and the country. Johannesburg s affordable markets are expanding faster than the overall market: In 2007, the value of Johannesburg s share of the nation s housing and its affordable properties were both about 20% of each market. By 2010, Johannesburg s national market share had dropped slightly to 18%, while its affordable areas had grown to 25% of the city s total market. In 2007, about 40% of the total sales that year were worth R 500 000 or less. In 2010, despite the slump, almost 45% of the total sales were under R 500 000.
41 Conclusions cont. Affordable areas are more stable than markets overall Lower churn rates means that residents in the affordable suburbs of Johannesburg live in their homes for longer periods than in non-affordable areas or the city as a whole. Homeowners have higher levels of equity than non-affordable areas or the city as a whole because of longer tenure, lower bond rates. In the lower sales price bands, average sales prices have remained more stable than upper income markets, providing a greater ability to predict where values will be over time. High equity levels suggest opportunities for the households living in these suburbs to invest in new housing options. Johannesburg s affordable properties are moderately well-distributed There are a few affordable suburbs which are well located near the inner city, near jobs and transit, boosting the housing market Johannesburg s 136 000 registered government-sponsored properties are distributed throughout the city. This represents an opportunity to establish a robust range of affordable housing solutions, if these assets can be leveraged effectively. Many of these properties will enter the market fully tradable, as the 8 year sale restriction expires over the coming years. The majority of affordable suburbs however appear to have poor access to public and cultural amenities and centres of employment.
42 Conclusions cont. Johannesburg s affordable suburbs are underleveraged Although Johannesburg s average loan to value (52%) is higher than the national average (48%), affordable areas have lower loan to values, averaging 46%, reflecting the lower loan amounts generally available, and/or increasing property values in these areas. Johannesburg s affordable areas have lower bonded sales rates (34%), despite Johannesburg metro s overall above-average rate (58% as opposed to 49%). When compared to other metropolitan areas, Johannesburg s affordability index (the relationship between the average home price and the average household income) is lower than other metropolitan areas. Property values and prices in the affordable areas showed more stability and less volatility, making projections within these market bands more reliable.
43 Conclusions cont. Despite a drop over the period, low and mid-priced property sales constitute a significant proportion of the real estate market in the city In 2007, about 40% of the total sales that year were worth R 500 000 or less. In 2010, despite the slump, almost 45% of the total sales were under R 500 000. In 2007, the value of Johannesburg s share of the nation s housing and its affordable properties were both about 20% of each market. By 2010, Johannesburg s national market share had dropped slightly to 18%, while its affordable areas had grown to 25% of the city s total market. There has been a significant increase in housing stock registered without a value and this stock is located predominantly in affordable areas. The lack of a related increase in sales within these areas strongly suggests that these are newly registered existing subsidised residential properties.
44 Questions Is Johannesburg s affordable housing as dispersed as it appears? Indicators are inconclusive is Johannesburg more expensive or more affordable than its peers? Where? How? What areas are of most interest to potential development? How are they served by key amenities such as transit, employment and schools? How can lenders be convinced of the availability of potentially under-served areas? What conditions cause such low churn in this large metropolitan city?
45 Overall The efficient and effective provision of housing is a central tenet of any urban growth and development strategy. Not only is access to housing the only land use mentioned as a right in the South African constitution, but strengthening housing options boosts economic opportunity, barriers to access affect the economy as a whole. There are many areas of opportunity to support the creation and expansion of Johannesburg s affordable housing market Unlike other more prominent comparably-sized industries, local housing market dynamics are not well understood, despite their importance as a building block of the nation s economy. This profile begins to assist in increasing this understanding.
Affordable Land and Housing Data Centre Understanding the dynamics that shape the affordable land and housing market in South Africa. Filling the Gaps: Affordable and other housing markets in Johannesburg September, 2012 DRAFT FOR REVIEW