Equality in Property Becoming a Reality
Category Property market overview
The recent celebration of South Africa’s twentieth year of democracy has brought issues of equality to the forefront for the moment. In some cases great progress has been made, in others not so much. When it comes to property ownership, which is still one of the measuring sticks used by South Africans, it would seem that the situation is becoming more equitable.
The Rise of the Black Middle Class
The black middle class in South Africa is growing; in fact it has more than doubled over the last eight years, from an estimated 1.7 million people in 2004 to 4.2 million in 2012. These figures were recently released by the UCT Unilever Institute of Strategic Marketing as part of its “4 Million and Rising” report.
In contrast the white middle class grew significantly less; from 2.8 million to 3 million suggesting a more equitable division of wealth is starting to take place. Whilst marketers scramble to meet the needs of the rapidly growing black middle class the question remains as to whether the growth of this segment of society is being reflected in the ownership of residential property.
Mortgage Indicators
Data released by Statistics SA indicates that 363 000 black South Africans had mortgages in 2011 and bond originator, Betterbond, believes that almost 50% of all home loan applications are now made by this group (as opposed to a meagre 12% in 2002). Georgina Alexander, researcher at the SA Institute of Race Relations, has stated that bonded home ownership serves as an important indicator of the middle class. “Based on the information we have available it would certainly seem that the black middle class is not only growing, but is also increasingly investing in residential property,” says Jan le Roux, CEO of Leapfrog Property Group.
The recent release of suburb specific details, as compiled during the 2011 National Census, reveals a positive trend. Dr Arulsivanathan Naidoo, the head of Stakeholder Relations at Stats SA, told The Mercury; "Since the start of our democracy until 2001, when the previous census was held, there was not much change in terms of migration patterns and suburb population dynamics. However, in the 10 years from 2001 until 2011, the last census, there has been a lot of change."
According to the data the traditionally white suburb of Kloof in Durban is an example of a nationwide trend; the growing black middle class has migrated into the area, now making up 54% of residents.
The 2013 Property Report issued by Lightstone indicates that black ownership of luxury properties (meaning those valued at R1.5 million or more) has also increased to 7.8%, up from 3.3 % in the last decade. Andrew Watt, Managing Director of Lightstone pointed out to SA Commercial Property News that these statistics indicate that only 8% of an estimated 400 000 luxury homes available are owned by this group.
Economic Pressures Weigh Heavily
In fact Lightstone’s figures reveal that black ownership of the overall residential property market has only grown from 37% to 42% over the past ten years. “While these figures are certainly encouraging they do also highlight the fact that a fairly small percentage of the black middle class is purchasing homes”, believes le Roux, “The tough economic climate certainly has had a big impact but I think that certain affordable areas are by the stroke of a pen deemed too high a risk for lending purposes is a big part of the problem.”
Unilever Institute Director, John Simpson, issued a statement about the Institute’s report in which he indicated that 80% of the group they surveyed are tightening their purse strings and a further 22% admitted to struggling to manage their debt.
“It’s no secret that the average citizen is feeling the pinch due to the rise in costs, the current economic climate etc. Whilst it is very encouraging to see that the black middle and high income groups are investing in property, this trend will likely only increase as pressure on people’s incomes ease”, says le Roux, “that being said people need to take stock of their finances now; saving as much as possible if they are to be in a position to afford a home deposit anytime soon”.
Author: Leapfrog Property Group
