In the area 3 - Townships

Township residential property is in much better shape than its suburban counterpart, a survey showed on Tuesday.

The third quarter FNB Township Property Barometer survey showed that township markets are, like their suburban counterparts, on a slowing trend, but that their performance remains significantly better than the suburban markets.

"In these troubled financial times, the township markets have some advantages over the suburban markets when it comes to sources of support," said FNB Property strategist John Loos.

Most affordable option

Loos pointed that with the number of employed black people on the increase, most first homebuyers view the township as the most affordable option compared with the suburb.

He added 60 percent of home buyers in Gauteng are first-time buyers with 50 percent in Durban and 45 percent in Cape Town, compared with a mere 12 percent in the most recent 'suburban' Barometer survey.

Whereas two in ten sellers in the suburbs were believed to be selling to emigrate in the third quarter, only one to two percent of sellers were believed to be doing the same in the townships.

In Gauteng just over a third of township buyers are believed to be from the suburbs, wanting to return to the townships compared with just under a quarter in Durban and just over a quarter in Cape Town.

Higher activity level ratings in townships

On a scale of 1 to 10 the main FNB Barometer shows suburban estate agents rating demand activity levels at 4.1 in the third quarter while the October survey of townships recorded higher activity level ratings of 4.84 in Gauteng, 5.23 in Durban and 5.55 in Cape Town.

Finally, though, superior township property performance is not all about demand levels and admittedly the township demand activity ratings don't exceed the suburbs by a huge margin, Loos noted.

"It is also about supply constraints and with townships traditionally being less traded areas due to lower mobility of low-income people many estate agents surveyed do indeed indicate a shortage of stock relative to demand, particularly in Durban," said Loos.

In Gauteng, 31 percent of respondents report a shortage of stock relative to demand, 38 percent in Cape Town and a massive 68 percent in Durban.

Also, although demand activity levels are no longer overly impressive in the townships, stock shortages may be playing a key role in sustaining still-impressive house price inflation.

Year-on-year (y/y) house price inflation for the three major metros' townships (using Deeds Office data) was estimated at 19.7 percent y/y in the third quarter which compares extremely well with the FNB National House Price Index inflation rate of a mere 3.3 percent for the same quarter.

Durban township house price inflation estimated at 40 percent y/y for the third quarter

Split up into the three regions, the Durban Township House Price Inflation rate was estimated at 40 percent y/y for the third quarter, well above the 18.4 percent and 7.4 percent for Gauteng and Western Cape Townships respectively.

"The far-higher inflation rate of Durban townships would seem to corroborate with what Durban agents are saying about chronic stock shortages," he added.

The Township Barometer is a survey of a sample of estate agents, operating in former black townships (excluding so-called coloured and Indian areas) as classified in the apartheid era, regarding the condition of these areas' residential property markets. The survey was limited to the major regions' townships (i.e. Gauteng, Cape Town and eThekwini metros).

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