Examining and unpacking eThekwini's residential property market - Maria Nkhonjera 11 February 2021 - Centre for Affordable Housing Finance Africa
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Examining and unpacking
eThekwini’s residential property market
Maria Nkhonjera
11 February 2021
CAHF’s work in South Africa is supported by:
Overview
1 Citymark analysis and methodology
2 Overview of South Africa’s residential property market
• By market segment
• Government-subsidised housing
• New build vs resale market activity
3 Thinking about the impact of COVID-19
• First time home buyers
• Estates vs. freehold vs. sectional title
• Bonded transactions by lender
4 eThekwini analysis
5 Summary and implications
1 Citymark: Analysis of residential property markets in SA’s eight metros
• Undertakes analysis of South Africa’s residential property markets, with a
particular focus on the lower end of the market.
Allows analysis in terms of:
• Since 2015, utilising title deeds data obtained from Lightstone: Latest extract for
2008- 2019. New vs. resale markets
• Valuations provided by Lightstone and are not based on municipal valuation Transactions financed with a bond
rolls. or without
• Market segmentation enables examination of differentiated performance: By lender
• Entry level (under R300 000). Type of buyer e.g. first-time
• Affordable (R300 000 – R600 000) homeowner
• Conventional (R600 00 – R900 000)
• High-end (R900 000 – R1.2m) Property type: free-standing house
• Luxury (R1.2m and over) vs. sectional title vs. private estate
• Only covers properties which appear on the deeds registry (the formal market). Focused analysis on government-
Does not include: subsidised property performance
• Informal settlements against total market benchmark
• BNG properties where beneficiary has not received their title deed.
• Proxy used to identify govt-subsidised properties (e.g. BNG, RDP houses).
2 Overview: South Africa’s residential property market
As at end 2019,
there were approx
6.6 million
residential
properties on the
deeds registry.
55% were valued at
less than R600 000.
About 30% of all residential properties were financed by government
(2 million properties).
An estimated 67% of residential properties under R300 000 are govt-subsidised.
Data source: CAHF’s Citymark, using deeds registry data supplied by Lightstone Pty. as at the end of December 2019 (sourced June 2020).
3 Thinking about the impact of COVID-19 on residential property markets
• Significance of housing as a key site through which COVID-19 is experienced.
• FNB: Higher end still in excess supply and bottom end in structural supply deficit.
• Expected lockdown impact → residential transaction volumes (relative to values) and house
price growth would slow→ market performed better than expected (especially mid-value
segment).
• Weakening construction activity → decline in supply of new residential units.
True impact of COVID-19 may
• Cash sales of RDP houses → may be informal transaction of RDP
4 How do metro residential property markets compare?
Number of residential properties
• CoJ had the largest residential property market in terms of number of properties.
• CCT also has largest share of properties valued over R1.2 million.
• eThekwini has total of 461 881 residential properties, of which 21% were valued R300 000 or less.
• Total value of eThekwini’s residential property market is fourth highest after CT, Joburg and Tshwane: R420.5 billion.
Data source: CAHF’s Citymark, using deeds registry data supplied by Lightstone Pty. as at the end of December 2019 (sourced June 2020).
Metro residential property markets by market segment (2019)
Cape Town
Number: 767 275
Value: R1.16 trillion
Number: 461 881 residential properties
Total value: R420.5 billion
Nelson Mandela Bay
Number: 239 181
Value: R136.7 billion
Data source: CAHF’s Citymark, using deeds registry data supplied by Lightstone Pty. as at the end of December 2019 (sourced June 2020).
How has the market segmentation of eThekwini’s residential market evolved over time?
Majority of the entry-level houses
(less than R300 000) are
government-subsidised: 59%
Declining
Increasing
Data source: CAHF’s Citymark, using deeds registry data supplied by Lightstone Pty. as at the end of December 2019 (sourced June 2020).
How does the spatial picture of the residential market evolve over time?
Distribution of residential properties by market segment – eThekwini
2009 2019
• Properties still concentrated in Berea, Bluff, Illovo North, Durban Central – more high-end housing
• Affordable housing in Newlands East, uMkumbaan
Data source: CAHF’s Citymark, using deeds registry data supplied by Lightstone Pty. as at the end of December 2019 (sourced June 2020).
Government-subsidised housing makes up a significant portion of eThekwini’s residential
property market at the lower end.
eThekwini, 2019 In eThekwini 21% of all
residential properties are GSP
o Nelson Mandela Bay: 42%
o Cape Town: 25%
Data source: CAHF’s Citymark, using deeds registry data supplied by Lightstone Pty. as at the end of December 2019 (sourced June 2020).Steady delivery of government subsidised properties in eThekwini over last five years Data source: CAHF’s Citymark, using deeds registry data supplied by Lightstone Pty. as at the end of December 2019 (sourced June 2020).
Investment in government housing programme has also changed the spatial layout of the metro.
Phoenix
Chartsworth
Illovo North
Data source: CAHF’s Citymark, using deeds registry data supplied by Lightstone Pty. as at the end of December 2019 (sourced June 2020).GSP’s aren’t just sitting at the bottom end of the market.
Number of government-subsidised residential properties by market segment, 2019
Nelson Mandela Bay • Total 101 446 GSP
• Total 98 638 000 GSP • 20% of GSP affordable
eThekwini • 32% of GSP affordable
• 91% of GSP over 8 yrs old
• 96% of GSP over 8 yrs old
• Cape Town and Nelson Mandela Bay −
share of GSP properties valued between
R300 000 and R600 000: 30% and 20%
• eThekwini has over half (55%) of GSP
valued under R300 000 (larger portion
of GSP valued less than 8 years old)
• Government-subsidised properties Cape Town
(GSP) play a critical role in the entry and
affordable markets, particularly for • Total 191 165 GSP
resale. Both segments serve an • 30% of GSP affordable
important ‘gap market’, including for • 82% of GSP over 8 yrs old
the working class.
Data source: CAHF’s Citymark, using deeds registry data supplied by Lightstone Pty. as at the end of December 2019 (sourced June 2020).Resale of government-subsidised properties is a critical market to watch, and support. Data source: CAHF’s Citymark, using deeds registry data supplied by Lightstone Pty. as at the end of December 2019 (sourced June 2020).
Where is the resale activity of government-subsidised houses?
• The majority of GSP resale transactions in 2019 occurred in
Illovo North and Trenance Park , largely in the entry and
affordable markets.
• The highest number of resale transactions, by sub-place
was recorded in Illovo North (197 transactions), averaging
R254 459, but largely in the affordable market.
• Average resale value of GSP in 2019 in eThekwini: R349 043.
* Assumes 8.75% interest rate, 20 year term, 25% instalment to income ratio.
Data source: CAHF’s Citymark, using deeds registry data supplied by Lightstone Pty. as at the end of December 2019 (sourced June 2020).GSP are the entry level rung to the formal property market, and provide an important opportunity to
support the availability of affordable housing targeted for the working class.
96% of govt subsidised properties in eThekwini have passed the 8-year period determined by the pre-emptive clause.
Applying the churn rate of 1.2% on govt-subsidised
properties in eThekwini older than 8 years suggests the
potential for:
1 130 • Compared to new
registrations of 813 GSP
Total residential properties in eThekwiini in 2019
GSP over
on the Deeds Registry at end December 2019: 8 years old • Average resale price of
GSP in eThekwini in
461 881 2019 = R349 043
Government- … resale … new mortgage … new buyers
subsidised transactions of loans to support and new
Properties properties properties that resale activity and housing supply
financed by the National churn rate: 2.49% sell less than small business Sellers have
private sector GSP national churn rate: 0.61% cheapest newly development, equity to buy up
built house by leading to local the housing
eThekwini churn rate for non-GSP: private developer economic ladder,
3.2% - 3.7% over last five years (R540 000) development, stimulating new
increased business supply
taxation, etc.
Data source: CAHF’s Citymark, using deeds registry data supplied by Lightstone Pty. as at the end of December 2019 (sourced June 2020).Distribution of new residential transactions
New delivery
eThekwini, 2019 supported by
GSP
740
36% of total
new
transactions
• Delivery at lower end has increased overtime due to govt subsidised
housing.
• New registrations: 2 074in 2019
• 36% entry market.
• 30% luxury market
• 16% conventional market
• 11% affordable market
• 7% high-end market
• But declining new build activity in middle market (R600-R900 000)
• Of the 740 new transactions in the entry market (properties valued under
R300 000) 95% were government-subsidised properties.
Data source: CAHF’s Citymark, using deeds registry data supplied by Lightstone Pty. as at the end of December 2019 (sourced June 2020).Resale market
• 84% of all residential transactions in
eThekwini in 2019 were resale.
• In 2019, there were 12 897 resale
transactions in the City of eThekwini.
• In the entry market (properties valued
under R300 000), 673 were resale
transactions and 740 transactions were
new registrations (primarily government-
subsidised properties).
• At 7% interest rate, that R300 000 house on
resale market is affordable to a household
earning approx. R9 400 /month *
* Assuming 20 year loan term, 7% interest rate, and 25% instalment to income ratio.
Data source: CAHF’s Citymark, using deeds registry data supplied by Lightstone Pty. as at the end of December 2019 (sourced June 2020).How are first-time homeowners accessing the property market?
eThekwini • Majority of first-time home
In 2019, 6 195 households buyers/owners access their property in
became homeowners for the resale market: 80% —indicating that
the first time: the resale market is the main means for
Purchased a government- first-time homeowners to step onto the
subsidised house on the property ladder.
Bought a
resale market new house
• The drop in the prime rate from 8.75% in
March, to 7% significantly increases
affordability and creates considerable
opportunity to broaden access to
mortgage finance, particularly for first-
time (working-class) homebuyers.
Beneficiaries of • For example, a monthly income of
government’s subsidised approximately R14 200 is needed
housing programme to acquire a R400 000 house
Bought an existing (without a FLISP) when prime was
(non-RDP) house 8.75%.*
on the resale market
• With prime dropping to 7%, the
same house becomes affordable to
a household with a monthly
income of R12 300.
• CAHF 2020 Yearbook estimates cost of
cheapest newly-built house by private
developer in SA as R539 830, which
would only be affordable to households
with monthly income of R19 100
(approximately 21% of urban
* Assuming 25% instalment to income ratio, 20 year term. ** Assuming same terms, 8.75% interest rate. population).**
Data source: CAHF’s Citymark, using deeds registry data supplied by Lightstone Pty. as at the end of December 2019 (sourced June 2020).Most first-time home buyers are buying existing houses in the conventional market segment
R600 000 – R900 000.
The majority of first-time
home buyers/owners access
their property in the resale
(non subsidy) market.
But the resale of GSP is also an important avenue
for low income households to step onto the
property ladder: of the 349 resale transactions by
first-time buyers in the entry market, 292 (61%)
of these were GSP.
Data source: CAHF’s Citymark, using deeds registry data supplied by Lightstone Pty. as at the end of December 2019 (sourced June 2020).Free-standing houses, sectional title, and private estates—by market segment
Metro-wide, the average transaction price was:
• R1 190 175 for sectional title
• R1 013 769 for freehold properties
• R3.2 million for estate properties.
eThekwini has second largest
share of sectional properties of
all eight metros: 77%
Sectional title properties are also mostly
in the upper end of the market:
67% of sectional title properties were
valued over R600 000, which would require
* Assumes a 7.0% interest rate, 20 year loan term, and 25% loan to instalment ratio. a monthly income of over R18 000. *
Data source: CAHF’s Citymark, using deeds registry data supplied by Lightstone Pty. as at the end of December 2019 (sourced June 2020).Affordability, property type, spatial planning and integrated cities
eThekwini
Stock of residential properties by property type, 2019 New residential transactions, 2019
Data source: CAHF’s Citymark, using deeds registry data supplied by Lightstone Pty. as at the end of December 2019 (sourced June 2020).Where are banks most active?
Total bonded transactions by market segment by lender (2019)
eThewkini
• Lending for low- Cape Town
value properties
significantly low.
• Total of 77 bonded
transactions under
R300 000 in
eThekwini in 2019.
• Absa (42%), FNB
(28%) and Standard
Bank (19%) are
most active in the
entry-level under
R300 000 market. Nelson Mandela
Data source: CAHF’s Citymark, using deeds registry data supplied by Lightstone Pty. as at the end of December 2019 (sourced June 2020).Mortgage finance makes a big difference to price
Government-subsidised properties: Number and average price of resale transactions by year,
with and without a mortgage (2015 -2019)
Cape Town
eThekwini
R584 268 R485 676
R119 068
266%
difference Nelson Mandela Bay
R159 498 with and
without a R325 057
mortgage
R146 841
Data source: CAHF’s Citymark, using deeds registry data supplied by Lightstone Pty. as at the end of December 2019 (sourced June 2020).5
What are the challenges hindering access to housing and
housing finance?
•
• Limited delivery of new affordable, entry market housing except through government.
Data-supported
analyses help • Limited spatial transformation, impacting affordability.
identify • Little growth in mortgage market, with limited access for low income earners.
affordability • Poor functioning of resale market at lower end/ government housing programmes.
patterns, gap
markets, and
borrowing
constraints.
What can be done?
This can inform
policy and improve • Make transaction support more widely available to facilitate formal transactions (leverage
targeting of
resale market).
investments and
interventions in − Transaction Support Centre in Makhaza supports buyers and sellers to
eThekwini’s regularise title and transact formally.
residential • More deliberate use of municipal instruments to stimulate mortgage lending in low
property markets.
income areas and improve functioning of residential property market:
− Zoning and land use planning.
− Area based green lining to support mortgage and non- mortgage finance in
low value areas.Thank you!
maria@housingfinanceafrica.org
To view the most recent eThekwini metro
report, visit CAHF’s website:
http://housingfinanceafrica.org/documents/ethekwi
ni-housing-market-report-2020/
CAHF’s work in South Africa is supported by:Exploring the data using CAHF’s Citymark Dashboards
1 Overview of housing stock and transactions by metro (2008-
3 Mortgage lending at national, provincial, metro, and subplace
2019): http://housingfinanceafrica.org/documents/citymark-south-africa-eight- level (2008-2019):
metro-municipalities-deeds-data-dashboard/ http://housingfinanceafrica.org/documents/citymark-south-
africa-mortgage-lending-at-national-level-and-eight-metro-
• Provides a view of number of residential properties by market segment. municipalities-sub-place-level-2008-2018/
• Shows number and distribution of transactions by market segment. • Looks at supply of mortgage loans by banking institutions
and provides a view of lending patterns at national or
• Filter by metro, transaction type (new or resale), government subsidised provincial level.
properties, year, first-time home buyers, property type (estate v freehold v
sectional title) • Spatial distribution of bonded properties.
• Select tabs by number and value of new registrations;
2 Government subsidised housing at national and provincial number and value of resale transactions with a bond; total
level (2008-2019): http://housingfinanceafrica.org/documents/citymark-south- number of transactions with a bond; number and value of
africa-government-subsidised-housing-stock-and-transactions-national-2008-to- bonds outstanding.
2018/
• Filter by year, metro, sub-place, market segment or lender of
• Focuses exclusively on government-subsidised properties (GSP) interest.
• Shows spatial distribution of GSP.
• Select tabs by type of transaction (new, resale or bonded).
• Filter by province, year (2012-2019) and market segment of interest.You can also read
