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 Ekurhuleni: Stable, Available, Affordable 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 the affordable and other housing markets in the Ekurhuleni Metropolitan Municipality (Ekurhuleni) 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 Ekurhuleni < R250 000 R19,198,325,000 97% of metro in category R251 000-500 000 R31,989,325,000 83% > R500 000 R11,128,630,000 5% Ekurhuleni : All properties R19,790,005,000 14% of national in category R38,772,710,000 10% R207,901,340,000 8% National: All properties R146,580,735,000 R398,211,440,000 R2,624,765,870,000 Total R62,316,305,000 R266,464,055,000 R3,169,558,045,000 Percent of area 23% 8% Source: SA Deeds Registry, 2010 Residential properties in South Africa are valued at R3,169 billion The properties within Ekurhuleni are valued at R266 billion; although the city has an estimated 5,6% of the country s population, it contains 8% of the residential real estate value Properties in Ekurhuleni affordable areas are valued at R62 billion or almost a quarter (23%) of the total value of residential properties in the city 97% of properties below the value of R250 000 are located in affordable areas, indicating a high concentration of affordable properties in affordable areas
9 Number of registered properties 9% (502,000) of all South African residential properties are located in Ekurhuleni Just about two-thirds (59%) of these are located in affordable areas 27% 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 Ekurhuleni Ekurhuleni: All properties National: All properties < R250 000 110,743 113,485 1,141,801 R251 000-500 000 87,136 102,892 1,052,949 > R500 000 17,597 201,282 2,200,071 Unknown worth 78,934 84,233 1,182,071 Total 294,410 501,892 5,576,892 Percent 59% 9% 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 Ekurhuleni Average worth % of metro average Ekurhuleni : All properties Average worth % of national average National: All properties Average worth < R250,000 163,951 99 165,816 126 131,439 R251,000-500,000 365,955 98 374,899 100 375,628 > R500,000 824,700 71 1,166,069 90 1,290,364 Total 214,557 40 537,678 96 558,484 Source: SA Deeds Registry, 2010 Ekurhuleni has a significant value gap The average value of a home in Ekurhuleni almost equals the national average The average residential property within affordable suburbs (R215,000), less than half the national average, indicating a wide value gap
11 Value of properties Sales transactions Affordable areas in Ekurhuleni Number Value (Rm) Ekurhuleni : All properties Number Value (Rm) Number National: All properties Value (Rm) < R250,000 2,022 267 2,730 379 61,286 4,838 R251,000-500,000 1,883 695 4,210 1,646 40,579 15,654 > R500,000 416 379 9,061 10,128 101,740 147,636 Total 4,321 1,341 16,001 12,153 203,605 168,128 % 27% 11% 8% 7% Source: SA Deeds Registry, 2010 Ekurhuleni s affordable housing market is active: Properties sold in Ekurhuleni in 2010 comprise 8% of the number of properties sold in South Africa as a whole and 7% of the total sales value, Affordable properties were about one-quarter (27%) of all properties sold in Ekurhuleni in 2010 - this indicates sizable formal market activity in affordable areas Of the properties sold in affordable suburbs, about half (47% )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 Ekurhuleni Ekurhuleni : All properties National: All properties Average price % of metro average Average price % of national average Average price < R250,000 98,869 91 108,792 156 69,690 R251,000-500,000 365,784 94 390,388 105 372,949 > R500,000 1,024,234 92 1,111,239 60 1,841,133 Total 165,704 34 492,670 94 525,173 Source: SA Deeds Registry, 2010 While Ekurhuleni s overall values and prices seem aligned Ekurhuleni s average residential sales price is about 6% below the national average price, as is the average property value to the national average (4% below); current average prices in Ekurhuleni are 92% of its average values; Affordable areas seem undervalued Average prices in affordable suburbs however, are 77% of the metro s average affordable property value (R215,000) affordable areas may offer more collateral and thus a more secure lending environment to banks and investors than previously thought The significant gap between the average price in affordable areas to the metro s average price (R165, 704 to R492,670) implies more low-cost housing concentrated in affordable areas.
13 Value of properties Affordable areas in Ekurhuleni Number New registrations Value (Rm) Number Ekurhuleni: All properties Value (Rm) National: All properties Number Value (Rm) < R250,000 859 135 897 139 23,633 2,221 R251,000-500,000 1,093 419 1,572 621 18,012 6,786 > R500,000 233 128 2,224 2,650 21,912 27,338 Unknown worth 78-214 - 28,622 na Total 2,263 681 4,907 3,410 92,179 36,345 % of total 46 % 20 % 5 % 9 % Source: SA Deeds Registry, 2010 Ekurhuleni s affordable areas are expanding at ten times the rate of its overall market: About 5% of the nation s new units were in Ekurhuleni (4 907), but almost half (46%) of Ekurhuleni s new properties were in affordable areas; 86% of those were under R500,000, indicating expanding opportunities for lower income households to advance up the economic ladder through formal homeownership.
Location of affordable suburbs 14 Ekurhuleni s current affordable suburbs reflect its industrial legacy, but are ill-placed for affordable, efficient housing opportunities The map reflects the distribution of predominantly residential suburbs by average property value Ekurhuleni's affordable suburbs are predominantly in the former Black, Indian and Coloured townships and are located on the periphery of the City, beyond efficient transit and educational options There are a few affordable suburbs which are well located near urban nodes such as Germiston, Springs and Boksburg Ekurhuleni affordable suburbs, 2011 There are a growing number of suburbs located within former Black, Indian and Coloured townships that have average property values above R500,000
Access to amenities of affordable suburbs 15 Most affordable suburbs have much less access to amenities generally, but slightly better access to public amenities (transit, education, health services) than private (employment nodes, financial services) Centrally located affordable properties bolster property values Affordable suburbs access to amenities, 2011
16 Property ownership Owner type Affordable areas in Ekurhuleni Ekurhuleni : All properties National: All properties Number % of affordable areas Number % of Ekurhuleni all properties Number % of national all properties Individual 280,761 95 464,337 94 5,212,161 92 Company or organisation 12,861 4 30,161 6 440,946 8 Bank 684 1 1,036 0 6,014 0 Total 294,306 100 495,534 100 5,659,121 100 Source: SA Deeds Registry, 2010 The vast majority of properties in affordable suburbs, Ekurhuleni and nationally are owned by individuals - individual ownership is slightly higher in affordable areas Slightly more properties are held by corporations or other organizations (like governments) in Ekurhuleni and South Africa than in the affordable housing suburbs Bank-owned properties (such as foreclosures) are negligible in all three areas
17 Ownership type Affordable areas in Ekurhuleni Number Ownership type % of affordable areas Ekurhuleni : All properties Number % of all Ekurhuleni properties Number National: All properties % of all national properties Full registered title 285,183 97 431,215 86 4,698,479 84 Sectional title 9,025 3 52,577 10 669,753 12 Estate 202 0 18,100 4 208,660 4 Total 294,410 100 501,892 100 5,576,895 100 Source: SA Deeds Registry, 2010 Properties in affordable areas 11% more likely to be held in freehold title (97% to 86%) This is due primarily to the prevalence of sectional titles and estates in Ekurhuleni - 14% of properties are part of a sectional title or estate as opposed to only 3% in affordable suburbs The high rate of full ownership 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 Ekurhuleni Number 54,347 29.1 Mid tier lenders 3,755 42.2 Value (Rm) 11,360 13.3 512 9.8 Number Ekurhuleni: All properties 186,917 9.8 8,907 5.4 Value (Rm) 85,605 9.7 5,234 6.4 Number National: All properties 1,830,459 91% 164,465 8% Value (Rm) 879,799 91% 82,391 9% Other investors 128 17 409 77 205,310 42,280 Total loan volume 58,230 11,889 196,233 90,916 2,006,971 963,303 % of total 30 10 10 9 Source: SA Deeds Registry, 2010 In Ekurhuleni, 10% of the total loan value and 30% of the total loan production is invested in affordable areas In all area categories, the large commercial lenders share over 90% of the entire market Ekurhuleni s affordable areas show a slightly higher level of lending by large commercial lenders than the city overall (96% and 94% respectively) Mid-tier lenders have a slightly lower market share in affordable areas than the broader residential lending market (4.3% to 6%), unlike most other municipalities.
21 Government investment Location of subsidised housing Location of subsidised housing About 144 000 registered subsidized units have been built in Ekurhuleni since 1994, or about 10% of all subsidised stock registered nationally, on par with its share of residential properties nationally (10%). This represents about 28% of the city s registered housing stock, subsidized or not, the highest metro proportion in the country (it is noted that a significant number of subsidised housing units have not been registered) Clustering government housing constrains flexibility and distorts prices in some contexts. Diversifying these clusters can be a key strategy towards diluting these effects In the areas where housing is more evenly distributed within neighbourhoods, the investment provides significant equity and leverage opportunities, depending on the level of market vibrancy.
Leverage potential in affordable areas 22 Ekurhuleni s below average loan to values and above-average bond rates in affordable reflect active lending markets All properties in Ekurhuleni are about 17% more likely to have a bond than the national average, including affordable areas, which are slightly less likely to have a bond than the city as a whole but 13% are more likely to have a bond than the rest of the country Despite remarkably higher lending rates in affordable areas, Ekurhuleni s loan to values in affordable areas are 7% less 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 historically lower lending rates. 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) 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 Ekurhuleni Ekurhuleni : All properties National: All properties Average loan to value 41% 49% 48% % of sales that are bonded 62% 66% 49% Source: SA Deeds Registry, 2010
Affordability 23 Affordability spectrum Ekurhuleni All metros National: All properties Monthly payment on average home R4,517 5,440 R4,815 Average monthly income available for mortgage R1,177 1,289 R846 Affordability index 3.84 4.22 5.69 Affordability Target R128,062 R140,265 R92,040 Percent of existing average home price 26% 24% 18% Source: SA Deeds Registry, 2010 In Ekurhuleni, the average household income can afford a home worth approximately R 128 000, which is about one-quarter the cost of its average property Ekurhuleni s affordability index is 3.84 this means it takes almost four times the average income to afford the average house in the city. This affordability index is lower than the national index, indicating that Ekurhuleni 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. Affordability indices are not yet available for affordable areas because incomes cannot be disaggregated at the suburb level yet.
24 Churn Churn Affordable areas in Ekurhuleni Ekurhuleni : All properties National: All properties < R250,000 0.31% 0.29% 0.90% R251,000-500,000 0.67% 0.66% 1.28% > R500,000 3.01% 3.22% 3.23% Unknown worth 0.26% 0.24% 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, as well as for the city overall were lower than the 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. 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 Over the past five years, the growth of new registrations has varied significantly depending on the price band. In Ekurhuleni, while the number and the aggregate value of new registrations dropped by half over the period, the proportion of those properties under R 500 000 of the overall market remained the same (48% to 50%) Ekurhuleni s affordable properties experienced an uncharacteristic spike and dip in new registrations, compared to other metropoles
Residential properties added per year 28 The affordable market as a percent of new registrations outpaced other markets over the past four years Nationally, the affordable homes proportion of the market has grown by 5% since 2007, the same proportionate share lost by residential properties added worth over R500 000; In Ekurhuleni, over the past four years, despite the drop in the upper property market, the affordable proportion of the market has held steady at almost half (48%) of all properties added; Nationally, the value of residential stock added per year nationally has dropped two-thirds since 2007, largely as a function of the economic downturn; in Ekurhuleni, the total value of new residential properties added has also dropped by two-thirds since 2007, from an estimated R 9 billion to R 3 billion in 2010.
Growth of affordable markets The size of Ekurhuleni s affordable market has grown faster than Ekurhuleni s share of the national market 29 In 2007, the value of Ekurhuleni s share of the nation s housing value was about 9%; four years later, Ekurhuleni s proportion of the national market was the same (despite the overall growth of all metros), but Ekurhuleni s affordable areas market share increased slightly by 2% to 23% of the overall market. Over the same period, however, Ekurhuleni s affordable properties proportion of new registrations shrunk slightly as a share of the whole market
30 Sales per year Sales within price bands varied considerably. In 2007, Ekurhuleni had 26 400 sales; in 2010, there were 16 000, a 39% drop due in large part to changing economic conditions In 2007, almost half of the total sales that year were worth less than R500 000. In 2010, 43% of the total sales that year were under R500 000. Low and mid-priced property sales constitute a significant proportion of the real estate market in the city Over the past four years, the properties priced less than R 500 000 showed more stability and less volatility, making projections within these market bands more reliable. This is an important consideration when predicting the future value of loan collateral or determining the timing of sales within large scale affordable housing developments over several years
31 Change 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. Unlike other metro areas, the growth in residential properties registered within Ekurhuleni affordable areas is lower than the growth of housing units in Ekurhuleni, all metropolitan areas and the country as a whole.
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 values over time. Higher priced sales are more influenced by external economic conditions. From a lender s perspective, stable housing values improves 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 Ekurhuleni remained above the national average, and above the rates of all metropolitan areas, but were consistent in terms of trends with other metropolitan areas 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 percentage 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 7 21 22 17 20 19 11 4 4 3 13 AVG 40% 41% 44% 58% 71% 57% 69% 68% 66% 57% Ekurhuleni s property market is of a medium size when compared to the other metros. The metro s percent of the nation s affordable housing is above average, while its percent of affordable suburbs is in the middle range when compared to the other metros.
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 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 Ekurhuleni s affordable properties are somewhat less concentrated than other large metro areas. It has: Below average concentration of affordable properties within affordable suburbs, and relatively modest new affordable registrations within affordable areas; Slightly above average properties in affordable areas of unknown worth (likely to be properties subsidised by government) and highest government registrations of all major metros An average percentage of the metro s property values within its affordable areas compared to all metros and the second highest of the major metros; Average lending rates within affordable areas of the major metros.
Market Potential 38 Market Potential Joburg Cape Town Tshwane Ekurhuleni 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 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 Churn in affordable suburbs for properties between R250 001 - R500 000 0.76 1.78 1.09 0.67 1.95 2.16 2.62 1.57 2.18 1.64 Churn in affordable suburbs for properties above R500 000 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 Ekurhuleni presents some interesting affordable housing opportunities: Its housing values and housing prices are the lowest of all major metros; Churn rates are the lowest of all metro areas, and within all price ranges; Perhaps related to this, its percent bonded sales is the highest of all metros, and the highest within all metro affordable areas; Ekurhuleni has the third lowest affordability indexes of the metros.
Presentation overview 39 1. Introduction 2. Market Size 3. Market Potential 4. Market Dynamics 5. Comparison to other Metropolitan Municipalities 6. Conclusions
40 Conclusions Ekurhuleni s affordable market is very active During 2010, just under one-third (27%) of the 16,000 properties sold in Ekurhuleni were in affordable suburbs, indicating measureable formal market activity in these areas. Of the properties sold in affordable areas, almost half (47%) were valued below R250 000. This indicates some product availability in the lowest end of the housing market Although total new registrations have halved over the past four years, in 2010, about half of Ekurhuleni s new registrations were in affordable housing suburbs. The proportion of those properties under R 500 000 of the overall market remained the same (48% to 50%). This indicates expanding opportunities for lower income households to advance up the economic ladder through formal homeownership Of all registered properties in Ekurhuleni, 294 000 are located in affordable areas, comprising just under two thirds (59%) of the total stock of the city. These properties are valued at R62 billion or just under half (23%) of the total value of residential properties in the city.
41 Conclusions cont. Affordable areas are more stable than markets overall Lower churn rates means that residents in the affordable suburbs of Ekurhuleni 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. Ekurhuleni s affordable areas are moderately concentrated but not well-situated The majority of affordable suburbs appear to have poor access to public and cultural amenities and centres of employment. Ekurhuleni s 142,000 government-sponsored housing units is the highest of all major metros. 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.
42 Conclusions cont. Ekurhuleni s affordable areas present attractive lending opportunities Affordable areas may offer more collateral and thus a more secure lending environment to banks and investors than previously thought While Ekurhuleni s overall values and prices seem aligned Ekurhuleni s average residential sales price is about 6% below the national average price, as is the average property value to the national average (4% below); current average prices in Ekurhuleni are 92% of its average values; its relationship between income and sales prices make it the most affordable metro in the country. Its Affordable areas seem undervalued: average prices in affordable suburbs however, are 77% of the metro s average affordable property value (R215,000). Churn rates are the lowest of all metro areas, and within all price ranges, implying steady demand, stable homeowners, and stronger, more attractive communities; Ekurhuleni s percent bonded sales is the highest of all metros, and the highest within all metro affordable areas: properties in Ekurhuleni exceed the national average by 17% (66% as opposed to 49%). At 62%, Ekurhuleni s affordable areas are slightly less, but still significantly higher than the rest of the country Ekurhuleni s average loan to value is 49%, which is similar to the national average of 48%. Affordable areas have slightly lower loan to values, averaging 41%, reflecting the lower loan amounts generally available, and/or increasing property values in these areas.
43 Conclusions cont. Despite a drop in production over the period, low and mid-priced property sales constitute a stable proportion of the real estate market in the city In 2007, about 50% of the total sales that year were worth R 500 000 or less. In 2010, despite the overall slump, 43% of the total sales were under R 500 000. In 2007, the value of Ekurhuleni s share of the nation s housing was about 9%, while its affordable properties were about 19% of the metro market. By 2010, Ekurhuleni s national market share had remained steady at 9% of the total, while its affordable areas had grown to 23% of the city s total market. There has been a significant drop in housing stock registered without a value. This stock is located predominantly in affordable areas, and reflects either less government activity in affordable suburbs (the most common reason for unknown sales values) or increased valuations of existing housing. Either way, better valuations mean better market understanding.
44 Questions What caused Ekurhuleni s spike and drop in its affordable property registrations from 2008 2010? Is Ekurhuleni as stable as it appears? How are churn rates so low, across all price bands in this major metro? Are affordable areas as affordable as they appear? How can that be leveraged to expand housing opportunity further? What has been the impact of the government investment in housing? What was its cause, and how has it affected the market overall? How can general understanding across the metro help understand its local impact? 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 underserved areas? City of Johannesburg Affordable Housing Market Profile, September 2012
45 Conclusions cont. 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. Unlike other more prominent comparably-sized industries, neighbourhood 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 Ekurhuleni September, 2012 DRAFT FOR REVIEW