Ethekwini's Residential Property Market
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eThekwini’s Residential Property Market Size, Activity, Performance Funded by A deliverable of Contract 7174693 Submitted to the World Bank By the Centre for Affordable Housing Finance in Africa February 2018 Acknowledgements This report was prepared by the Centre for Affordable Housing in Africa, for the World Bank as part of its technical assistance programme to the Cities Support Programme of the South African National Treasury. The project team wishes to acknowledge the assistance of eThekwini officials who contributed generously of their time and knowledge to enable this work. Specifically, we appreciate the support and vision of Beryl Mphakathi, head of Human Settlements and Ismail Vawda, professional planner, human settlements. We also wish to acknowledge Yasmin Coovadia, Seth Maqetuka, and David Savage of National Treasury; and Yan Zhang, Simon Walley and Qingyun Shen of the World Bank; and independent consultants, Marja Hoek-Smit and Claude Taffin, who all provided valuable comments. Project Team: Kecia Rust Alfred Namponya Adelaide Steedley Kgomotso Tolamo Aqua Suliali Illana Melzer eThekwini’s Residential Property Market: February 2018 2 eThekwini’s Residential Property Market Size, Activity, Performance ACKNOWLEDGEMENTS ..................................................................................................................... 2 FOREWORD ...................................................................................................................................... 6 EXECUTIVE SUMMARY ...................................................................................................................... 7 1 INTRODUCTION ...................................................................................................................... 11 2 THE HOUSING MARKET – AN ANALYTICAL FRAMEWORK ....................................................... 12 2.1 THE HOUSING ASSET ........................................................................................................... 13 2.2 PROPERTY MARKET FILTERING ............................................................................................... 17 2.3 SEGMENTING THE HOUSING MARKET ...................................................................................... 20 3 ETHEKWINI’S RESIDENTIAL PROPERTY MARKET ..................................................................... 22 3.1 MARKET SIZE AND VALUE ..................................................................................................... 23 3.2 MARKET ACTIVITY ............................................................................................................... 30 3.2.1 Supply of new housing as seen on the deeds registry .................................................. 30 3.2.2 Resale market activity ................................................................................................ 32 3.2.3 Lending activity .......................................................................................................... 37 3.2.4 Housing prices ............................................................................................................ 38 4 PROPERTY MARKET PERFORMANCE IN ETHEKWINI ............................................................... 40 4.1 HOUSING AFFORDABILITY AND ACCESS .................................................................................... 43 4.2 ECONOMIC AND SPATIAL TRANSFORMATION ............................................................................. 47 4.2.1 Economic Transformation ........................................................................................... 48 4.2.2 Spatial Transformation ............................................................................................... 53 4.3 SUSTAINABLE HUMAN SETTLEMENTS ...................................................................................... 55 4.4 MARKET RESPONSIVENESS .................................................................................................... 57 4.5 TARGETED MARKET PERFORMANCE ......................................................................................... 59 4.5.1 Umlazi ........................................................................................................................ 61 4.5.2 KwaMashu ................................................................................................................. 62 4.5.3 Inner City .................................................................................................................... 64 5 ETHEKWINI BY COMPARISON: HIGH LEVEL VIEW ................................................................... 65 6 BUILDING AN INCLUSIVE RESIDENTIAL PROPERTY MARKET IN ETHEKWINI ........................... 69 6.1 GROWING ETHEKWINI’S RATES BASE ....................................................................................... 70 6.2 STIMULATING AND SUPPORTING HOUSING CONSTRUCTION IN THE AFFORDABLE MARKET .................... 72 6.3 UNDERSTANDING AND WORKING WITH INFORMALITY ................................................................. 73 6.4 CONSIDERING THE DYNAMICS AND POTENTIAL OF THE RENTAL MARKET ........................................... 74 6.5 REALISING PRIORITIES WITH DATA-SUPPORTED DEVELOPMENT DECISIONS ........................................ 75 7 METHODOLOGY ..................................................................................................................... 77 7.1 MARKET SIZE AND VALUE ...................................................................................................... 78 7.2 MARKET ACTIVITY ............................................................................................................... 79 7.3 MARKET PERFORMANCE ....................................................................................................... 81 eThekwini’s Residential Property Market: February 2018 3 Tables Table 1 Total Residential Properties by property type, eThekwini, 2015 ........................................................................... 27 Table 2 Total repeat transactions in eThekwini: all and government sponsored, 2010-2015 .............................................. 33 Table 3 Churn by property type, eThekwini 2010-2015 .................................................................................................... 36 Table 4 eThekwini population income distribution............................................................................................................ 43 Table 5 Household income distribution vs. housing stock distribution by market segment, eThekwini .............................. 44 Table 6 Churn rates by market segment, eThekwini 2010-2015......................................................................................... 46 Table 7 Change in average property value, 2007-2015, of suburbs where 50% of properties are government-sponsored .. 49 Table 8 Churn rates in high performing suburbs, eThekwini, 2015 .................................................................................... 54 Table 9 Suburbs with mortgage financed transactions under R300 000, eThekwini 2015 .................................................. 55 Table 10 eThekwini's valuations roll by segments, 2012 and 2015 .................................................................................... 57 Table 11 eThekwini's strategic zones: key data, 2007-2015 .............................................................................................. 60 Table 12 Key residential market indicators: properties, transactions and bonds, all metros, 2015 ..................................... 67 Table 13 Indicators used to consider Market Size & Value ................................................................................................ 79 Table 14 Indicators used to consider market activity ........................................................................................................ 80 Table 15 Indicators used to consider market performance ............................................................................................... 82 Figures Figure 1 The Housing Asset ............................................................................................................................................. 14 Figure 2 Pools and flows to enable property market filtering ........................................................................................... 17 Figure 3 Blocked pools and flows undermine property market filtering ............................................................................ 18 Figure 4 A Property Ladder in eThekwini ......................................................................................................................... 19 Figure 5 Residential property for each market segment in eThekwini, by number and value, 2015.................................... 23 Figure 6 Distribution of residential properties by market segment, eThekwini 2015 (City Valuations data on the left vs. National Deeds Registry data on the right) ............................................................................................................. 25 Figure 7 Neighbourhoods in eThekwini with a high property value diversity, 2015 ........................................................... 26 Figure 8 Location of government-sponsored properties and informal settlements in eThekwini, 2015 .............................. 28 Figure 9 Estimated market values for shacks not in backyards, NIDS, Wave 4 data ...........................................................