The evolving landscape of affordable housing in South Africa

In the realm of real estate, the Affordable housing sector in South Africa has witnessed substantial changes over the past decade. From shifting average prices to evolving buyer preferences, understanding these trends is crucial for both buyers and sellers. 

The challenging economic conditions in South Africa are evident in the underperformance of the nation's Affordable residential property market. As a result, many new buyers are constrained to purchasing sectional title units in aging and overlooked neighbourhoods.  According to a report by Lightstone, there are roughly 2.8 million formally registered “Affordable” residential properties in South Africa, which accounts for half of the country’s 5.6 million registered properties they have estimated values for.

On top of this, there are roughly 1.7 million properties that Lightstone has not attached a value to, and many of these could also be classified as Affordable, with a significant number likely to be low-income housing that is not actively trading.

Properties under R750 000 are considered affordable, with further sub-division into three sub-bands: Lower Affordable (values under R250,000), Mid Affordable (R250,000-R500,000) and Upper Affordable (R500,000-R750,000) - this according to Lightstone. 

Average Purchase Price and Transfer Volumes

One of the most striking trends in the Affordable housing sector is the significant increase in average prices over the past 10 years. According to data, the average price paid for properties in the Affordable price band has surged from R230,000 in 2014 to R390,000 in 2023. This growth highlights the increasing financial pressure on lower earners, leading to a decline in transfer volumes from 78,000 in 2014 to 38,000 in 2023.

Sales in 2023: A Snapshot

Despite the decline in transfer volumes, the Affordable market remains active, with nearly 50,000 transfers occurring in 2023, accounting for a third of all sales. However, it is noteworthy that while the Affordable market constitutes 50% of registered properties, its sales activity only represents 25% of the market. Township sales accounted for just 10,000 transfers, with Sectional Titles making up 30% of sales and Freehold properties 70%.

Where to Buy

The data suggests that while 52% of South Africa's formal Affordable market is situated in traditional townships, the sales activity ratio is highest in the suburbs, particularly for Sectional Title properties. Suburbs boast 1.1 million (75%) freehold properties and 300,000 (25%) sectional title properties, while almost all Affordable properties in townships are Freehold.

A small proportion of the Affordable developments are new developments, with only 10% of available stock developed in the last five years.

The age distribution of all Affordable properties (not only those in Sectional Schemes and developments) ) is mostly between 25 and 35, and Lightstone said that demonstrates that there has been little relative investment in recent years in this category.

Age of Affordable Properties and Future Prospects

A key insight regarding Affordable properties is their age distribution, primarily between 25 and 35 years. This suggests that there has been little relative investment in this category in recent years. However, developers are now focusing on providing the start-up youth access to attractive and affordable housing, moving away from old neglected stock.

The Affordable housing sector in South Africa is undergoing significant transformations, with changing buyer demographics, shifting purchase patterns, and a renewed focus on providing quality housing to the younger population. As developers aim to revitalize the Affordable housing market, there is optimism for a more vibrant and inclusive real estate landscape in the years to come.