Lack of reasonably priced homes sent costs soaring 38% last year
The bad news is that the scarcity of affordable houses has made their prices the fastest growing in the property market. The good news is that this should encourage more developers to build affordable homes.
First National Bank (FNB) property strategist John Loos said that affordable homes increased in price by 38percent last year, far outpacing mid value, high value and luxury home value growth.
There are various definitions of affordable houses. FNB defines them as homes between 45m² and 77m² in size, and banking agreements with the government refer to them as homes aimed at households with an individual or joint income of between R2500 and R10000 a month. Affordable houses generally cost up to about R250000.
Demand far exceeds supply in this price range. A study commissioned by the Banking Association of South Africa estimated that there was a shortage of 625000 affordable homes in 2005.
Loos estimates that the shortage is now far greater because South Africa's property boom between 2000 and last year resulted in developers neglecting the lower end of the market because of the huge demand for expensive townhouses. The current slowdown in property prices affecting more expensive houses should result in more affordable houses getting built at last.
"The market now appears ripe for a natural shift in focus more towards the lower end. Average size of unit plans passed began to decline last year, and I believe that this will soon result in a steady trend towards a lower average size of unit in addition to the average stand size declining trend that is in place already."
The number of families wanting their own home is increasing faster than South Africa's population growth. While estimates of cumulative population growth for the nine provinces from 1997 to 2005 range between 9percent and 17percent, estimates of the growth in the number of households over the same period range from 22percent to 38percent.
Loos concluded that the key problem is how to keep affordable housing reasonably priced. With mid-priced and luxury homes now way out of the price range of average households, the number of people wanting affordable houses is growing and the available space is becoming smaller.