New Understanding in Housing Markets
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New Understanding in Housing Markets Leveraging Real Estate Value to Catalyze Urban (Re) Development 3 November 2014 Adelaide Steedley Agenda overview • Understanding markets • Implementing the mission • Sustainable housing markets • Expanding the Housing Continuum • Applying the policy to the neighbourhood • Next steps, way forward 2 Housing Continuum All options, all prices Private sector The gap Government Informal 3 Understanding markets Why is information important? Where would you invest? NEIGHBOURHOOD 1 NEIGHBOURHOOD 2 • Average home value, sales • Outperformed the city in 4/6 key price and per capita income housing performance measures, are one-third metro average indicating that the neighbourhood is • Almost half of the 11 000 growing faster than the city overall households rent • 5700 residential properties worth R2- • Only 11% of houses have billion mortgage bonds • 4 metro stations providing ready access • Over last five years, there have to major CBD been very few new • R175-million total annual household registrations income • R9-million in sales last year Reinforce perception or find opportunity? 4 Affordability How do you define affordability? BY VALUE BY INCOME City A City A • 48% of properties • Takes 1.7 times average income to under R500 000 afford average property City B City B • 73% of properties • Takes almost 4 times average income under R500 000 to afford average property Why is this important? 5 Current Housing Environment • How are housing opportunities currently created? – Opportunistically – In isolation – Risk averse • How would we like (or need) them to be created? – Strategically, core driver of growth and planning – Common understanding aligned across the housing spectrum – Within a context of opportunity, not risk 6 Housing Market Reports • Purpose – To provide housing market information, with a specific focus on opportunity – To build common understanding across the entire housing delivery chain • Methodology – Common data, indicators – Shared visual understanding – Cutting edge technology 7 Findings • Active: activity outpaces overall market • Growing: appreciation outpaces overall market, percentage of market share is growing • Greater leverage: less lending, greater appreciation means more equity to leverage • Less risk: more equity invested, on par payment performance • Does this resonate with your experience? • Would partners be more likely to activate housing? 8 Active: Housing Performance Index How do affordable Housing Performance Index, Housing Performance Index, markets By Metro, 2007 - 2012 By Affordable Areas, 2007 - 2012 fare? More growth More growth More growth Less growth Less decline More growth Less growth More growth Less decline 10 Growth: Housing Index locally Housing Performance Index By suburb, Johannesburg, 2013 Homeownership markets are growing along corridors, areas targeted for growth What has municipality done or is doing to encourage this growth? What can cities do to leverage growth near its target areas? Growth: Market share, appreciation All Sales Property Value Appreciation By property segments All metros and Affordable properties, 2008 - 2013 2008 – 2013 Affordable properties All metros Residential values of affordable properties are Market share is growing, growing faster each year since keeping pace 2008, except the 2009 dip Greater leverage: greater equity More accurate picture means more effective market solutions Average equity = R384 000 Reduces average sales price by about half Mo payment = R34k to R20k This is the most common way families move up the continuum Most affordable properties, average equity of R174 000 Saves R7k per month Greater investment lowers risk Who is investing in metro housing markets? Lending: Sources Who is investing in metro’s residential growth? As you expand view of market growth, expand view of partners. Lending: bonded sales growth As markets grow, loan investment leverages that growth While not the most sales, experiencing the most growth in sales and bonded sales Cities can look closer at these dynamics – where are new sales? Lending: new sales Where are all these new sales? City of Tshwane Top 15 New Sales, by suburb Total Suburb Sales Olievenhoutbos 1 178 Soshanguve V Ext 1 784 Soshanguve L Ext 1 536 Soshanguve Ext 13 381 Nellmapius Ext 8 372 Soshanguve East Ext 4 341 Nellmapius Ext 7 275 Soshanguve PP 1 241 Mamelodi Ext 8 225 Mamelodi Ext 18 222 Nellmapius Ext 6 207 Klipfontein 178 Elandspoort 175 Montana Tuine 164 Equestria 157 What can the city do to leverage its investment? What is the city doing to ensure ongoing affordability? Affordability: from Income to Price More accurate picture means more effective market solutions Affordability is best measured as the relationship between local incomes and local sales prices. Tshwane’s above average incomes and below average sales prices makes it most affordable. Affordability: from Income to Price More accurate picture means more effective market solutions Metro’s percent affordable suburbs by income is half those considered affordable by value How does it look at the neighbourhood level? Affordability: Affordability Ratio More accurate picture means more effective market solutions Suburbs Affordable By Price: Suburbs Affordable By Income: Average price is below R500 000 Average price affordable by average income Green and yellow dots : average value under R500 000 Darker red: less affordability By price, Ebony and Ivory Park are “affordable,” Randburg is not; By income, many areas are affordable to those living there, many areas are not; City can be clear when defining “affordable” - internally, and externally. Expanding the Housing continuum 3 ways governments help close the gap: 1. Build it directly 2. Entice development through incentives – Legislation – Grants, subsidies – Land 3. Collaborate directly – Joint ventures, co-develop, share ownership 1 9 How Market Intelligence Helps Match methods and solutions to neighbourhoods: • Which housing scenarios do we want (rental, homeownership, affordability), and where • The tipping point: the least govt investment to entice most private sector investment Lead on strategies to expand continuum: • Designate sites – densities, zoning, access • Target markets – affordability, incomes, equity • Steer investment – subsidies, bulk, transit 2 0 Housing Target Index Housing Target Index City of Johannesburg Top 20 Suburbs Subplace Score Moffat View 9.0 Booysens 9.0 Roodepoort SP 8.0 Maraisburg 8.0 Lombardy East 8.0 Kew 8.0 Jan Hofmeyer 8.0 Delarey 8.0 Cleveland 8.0 Bloubosrand SP 8.0 Bezuidenhout Valley 8.0 Westdene 7.0 Unigray 7.0 Turf Club 7.0 Townsview 7.0 Towerby 7.0 South Hills 7.0 Rosettenville 7.0 Score it, map it, consider it Percelia Estate 7.0 Lenasia Ext 6 7.0 2 1 Does this reflect priority areas? Test the methodology Are these areas to prioritize rental (for example)? Do they meet the organization and program mission? Can they attract private investment? Turn methodology into program guidelines, ie: “Affordable” means … • “[Program] serves areas x% area avg income” • “[Program] serves households % area avg income” “Sustainable” means … • [Program] should prioritize dense areas as defined by.. • [Program] targets high growth areas, as defined by … • Targets diverse market, % rental, % ownership 2 2 Applications • Convey opportunities – Accomplishments, investments, markets • Test, establish program criteria – Enticements, loan guarantee funds, interest rate subsidies, downpayment/closing cost/loan programs • Strategic planning, decision making – Site/resource allocation, timing • Measuring impact – Market expansion, returns on investment 2 3 New Understanding in Housing Markets Thank you! Adelaide Steedley [email protected] www.housingfinanceafrica.org/citymark.