Cape Town - Affordable homes – ranging between R500 000 and R1 500 000 – are set to get a boost in sales partly thanks to an announcement last month by Minister of Finance, Pravin Gordhan on relief measures for lower and middle income earners.
In his 2016 budget speech, Gordhan introduced measures to partially reduce the inflation on tax payable by lower and middle-income earners, and personal income tax remained as before, offering some relief from rising interest rates.
Added to that, Gordhan announced proposed spending to the tune of R182.6bn on human settlement and infrastructure development. This means infrastructural improvements in the areas containing lower and middle income bracket homes and could lead to a significant boost in property sales in these areas, say analysts. The minister also announced an increase in transfer duties on upmarket properties, offering further consideration for buying into the affordable housing market instead.
Analysts say the growing middle class is likely to take advantage of the increasing opportunities these relief measures afford them to own their own homes in the affordable housing sector.
Chief executive of Remax Adrian Goslett said the demand for affordable housing was growing exponentially with “a great number of South Africans buying properties within this sector of the market”.
He also cites Gordhan’s R62bn announced housing subsidy as extremely beneficial for those who fall within the affordable housing market. The plan is to upgrade over half a million houses in informal settlements, provide 364 451 fully subsidised housing units and 55 878 finance-linked individual housing subsidies this year.
“Another element that will positively impact the affordable housing market is the personal income tax relief for low income earners. This will essentially put more money in the back pockets of these individuals and put more people in homes,” said Goslett.
Samuel Seeff, chairman of Seeff, said when looking at the residential property market, from a volume point of view, it was the middle class “that drives the market with the sub-R1.5m sector of the market comprising of about 60 percent of all deeds office registrations annually”.
Deeds stats on residential homes show that the average price of the total 289 613 homes sold and transferred last year was R1.23m.
The lower sectors where transfer duties are negligible or non-existent (below R750 000 in value) are also thriving because the purchase price is kept to a minimum.
“From both a consumer and property market perspective, the relief afforded to lower and middle-income earners was positive to note and it will provide some measure of a buffer against the rising costs of fuel, rates and other municipal tariffs,” said Andrew Golding, chief executive of Pam Golding Properties.
Trish Luthuli, Pam Golding property agent for the Soweto region, did not think the trend for increasing demand in affordable rentals or sales would abate “anytime soon”. In addition, prices in the lower sector are not subject to the same increase in sales prices as high price range homes.
Neville Berkowitz, property economist and adviser for agency HomeBid, said the average increase in prices last year was under one percent. He said the high price range homes (R10m and above) saw the highest average price increase of two percent, while the lower range of less than R250 000 dropped, improving affordability further.
Estate agents say areas such as Tableview and Blouberg, among others, in Cape Town offer good value in the under R1.5m category.
Former township areas, which offer affordable property with the added vibrancy of the areas, are also seeing an increase in sales, with experts saying they offer “more bang for your buck”.
Luthuli said many middle-class and wealthier individuals had been returning to Soweto from Joburg’s residential suburbs over the last number of years “because they miss the vibrancy of the sprawling metropolis”.
Homes in Soweto in the formal property market in this lower-to-middle income sector generally range from R300 000 to R1.2m, but there are also homes at the high-end of the market. She said the growing urban and black middle class would ensure an ongoing demand for affordable homes.
Umlazi, on the Durban coastline, is another area that is attracting this band of home investors. The prices in this sector range from R350 000 to R650 000.
Golding said that Gordhan’s announced key infrastructure measures would also probably attract more buyers to areas that are receiving renewed infrastructural development.
“Increased investment in tourism, cities, infrastructure – including public transport, telecommunications, commercial and land development projects augur well for South Africa, helping unlock opportunities for increased economic growth, along with easier access to employment in key hubs and opportunities for home ownership,” he said.
Seeff said a good economic climate and job growth were crucial for “a conducive growth in home buying in general and the subsidies announced by Gordhan should be seen as very supportive of home buying”.
Transfer duties in a nutshell
From March 1 transactions concluded on homes:
* Above R2 250 000 will attract a R85 000 once off and 11 percent of the value exceeding the threshold.
* Below R2 250 000 and above R1 750 000, a R45 000 initial fee is due making it significantly cheaper.
* Below R750 000 attract no duties and those between R750 000 and R1 250 000, only 3 percent of the value above the threshold.
Samantha Hartshorne, Independent HOME