Black homeowners excluded from property boom

Legal and financial constraints are preventing millions of black South African township residents from capitalising on their properties, a new study has found. Research conducted by Shisaka Development Management Services, based in Johannesburg, indicated that homes in black townships are worth an estimated R68.3 billion (around US $10 billion), but the use of residential property to create wealth remained limited. "Households are generally unable to leverage capital using their property as collateral and are not making use of such property to generate income, either through rental or the use of the property for business purposes," the report noted. In 2002, black townships contained an estimated 2.28 million households - one-fifth of South Africa's population. Over the past five years only 12 percent of township dwellings had been bought or sold, while recorded transactions for suburbs outside the townships showed that the number of houses changing hands had ranged from 26 to 51 percent during the same period. POOR INFRASTRUCTURE IMPACT PROPERTY PRICES One of the main reasons township households were unable to realise value from their properties was the poor quality of houses and the location. Extremely low incomes also meant that township residents could not improve their homes and were therefore unable to sell them. Researchers pointed out that the government's National Subsidy Programme had distorted market development, as many households preferred to wait for their "free house" rather than purchasing one themselves. "In addition, the fact that the house is 'free' undermines perceived value," said the report. Township residents viewed homeownership as a social asset - instead of perceiving the property as an investment, homes were seen as deriving value from being able to accommodate extended family or community members. "The attitude of households towards improvement of their homes indicates that if the home was improved, it was for the amenity value of the house, rather than investment value," researchers observed. Seventy percent of households indicated that improvements had been made to increase the size, quality or appearance of their homes, while only 25 percent said this would improve resale value. LACK OF FINANCE The lack of bank loans to purchase homes in the township was seen as particularly problematic, given that microloans were insufficient to purchase a property. Banks were reluctant to finance property purchases, as many homes lacked title deeds. Land title was not available to a significant portion of households, mainly because informal areas had sprung up without proclamation or townplanning and could not be registered as a formal township. The average household income of US $315 was also insufficient to sustain a mortgage loan with generally estimated repayments of over US $400 per month, and in some cases low-income families were reluctant to take on long-term debt. FORMAL RECOGNITION NEEDED Researchers recommended that the national government should take immediate steps to legally recognise informal settlements, upgrade facilities and open a township register, while municipalities should train valuators to ensure that valuations were speedily undertaken. A national programme should be undertaken to actively improve market information and transaction support in townships. For example, sellers could be assisted to advertise their homes on bulletin boards set up in community centre to disseminate information on the property market. While substantial gains had been made in refocusing municipal priorities over the last decade, environmental quality in the townships had lagged behind that of the non-township residential suburbs. "Municipalities need to commit higher levels of investment and management to secure the improved investment grade of township suburbs," the report urged. "This is important not only to the credit providers, but also to the residential value created for low-income households investing in the area." Full report: www.finmarktrust.org.za