Property & Wealth

State of the housing market and living standards

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The challenge to keep the overall housing and living conditions in South Africa on an upward trend is shifting from the public sector to private sector formations.

This is the picture that emerges when one studies the latest results from the Stats SA survey in conjunction with one conducted by the Institute of Race Relations (IRR) – both reflecting some sound progress since 1994.

It is commendable that our Statistician General is a proactive bureaucrat who has made it his hallmark to prepare useful benchmarks for the public benefit. Stats SA packages its stock-in-trade in various indices and reports, shared with the public from time to time. 

One of these, the living conditions survey, introduced in 2014, endeavours to paint a clearer picture of the progress, or lack thereof, in improving the standards of living of all who live in South Africa.

While the overall picture is one of progress, the chasm between haves and have nots, largely along racial lines, appears to be widening dramatically. White families now account for 8 % of the country’s families and blacks for 80%. The former, on average, earn around four times more than their black counterparts and this is probably food for thought.

Wide picture

Nevertheless, in the IRR’s recent SA Survey, it is reported that living standards are generally, across the board, on the up since 1994.

The access of South African residents to electricity, housing, sanitation and water services has steadily increased and the living conditions of South Africans are generally much higher than they were two decades ago.

Some of the more telling numbers crunched, for instance, are:

  • The number of households residing in formal dwellings increased from 5.8 million in 1996 to 12.4 million in 2014, or by 114%;
  • The number of households using electricity for lighting increased from 5.2 million in 1996 to 14.1 million in 2014 or from 58% to 91%;
  • The number of households with piped water increased from 7.2 million to 14 million; and
  • The number of households with access to flush or chemical toilets increased from 4.6 million to 9.9 million – an increase of some 118%.

The state and relevant government departments must get the kudos for this vastly improved delivery of service to many more people post-1994. However, there is some concern that public-sector delivery has probably, based on present budget allocations and resources, run out of steam.

Future improvements in living standards must be more co-driven by the labour market, new business development and increased private sector investment – all hinging on the engines of national economic growth, and not so much on public sector capacity.

And so, although the country’s property sector is predominantly driven by the white community’s prosperity, it nevertheless reflects the present symptoms and trends in the overarching national economy.

For instance, recent reports indicate that nationally, the number of plans passed for new homes showed an overall year-on-year decline of over 8% while the total real value showed a 1.9% year-on-year decline in value to R28.4 billion.

The three regions of KZN, Northern and Western Cape, actually showed increases in the number of plans passed, but the national figure is pulled down by huge declines in Limpopo, the North West Province and the Free State, and by falling numbers in the other regions too. 

Seen from another angle, while the number of new homes completed actually showed a 2.5% year-on-year increase as at end-July 2016, the total real value of those buildings fell by 1.3% to some R17.3 billion – always bearing in mind that the picture was not uniform in all regions.

That there was an overall increase in the number of buildings completed, was largely due to the 24% increase in hand-overs in the number of flats and townhouses where developers were mostly finishing off projects that they had planned between two and three years ago – the time it takes to get most multiple-unit developments from the drawing board to completion.

The development of mass housing in flats and townhouses concerns mostly large scale, long-term projects, much more difficult and costly to halt when demand slows. Which is why one will often see construction work continuing on flat and townhouse developments after an economic downturn has kicked in.

In other words, the lag in this sub-sector is only corrected when there is a decline in the number of plans already passed, as was the case last year – signalling that we can commensurately expect fewer new private housing developments over the next 18 to 24 months.

Pre-owned market

That also explains why there is a discount in the so-called pre-owned market, directly linked to the cost of stands in the middle and luxury segments of the housing market. This segment of the market has shown a year-on-year increase of over 20%, while

the cost of building a new house has increased substantially more – in conjunction with other factors. This pushed up the average cost of buying a newly-built home to 28% more than a comparable pre-owned property.

The slow-down in new homes will, however, tend to bolster prices in the pre-owned housing market, as demand increases from prospective buyers chasing affordability.

by Eve van Basten

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