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Affordable housing in SA: The opportunities for first-time homebuyers

Homebuyers entering the property market for investment are likely to find opportunities for their first purchase within the affordable housing sector.

Affordable Housing South Africa

Article summary

  • Opportunities for first-time homebuyers looking for a good investment lie in less popular towns and suburbs.
  • Low-cost houses for sale that fit into the lock-up-and-go category are snapped up quickly.
  • People are looking for affordable housing that enhances their lifestyle.

While industry commentators are noting that the property market is still stronger than it was in the 2008-09 recession, some areas are doing better than others. The top end of the market is slowing down, and the more affordable, less popular towns and suburbs are expected to experience a resurgence in interest and investment.

Homebuyers continue to seek areas that offer good value and good return on investment. These will offer opportunities for first-time buyers looking to invest, and for those looking to downscale or find a more practical way of living closer to work in order to avoid a long and often expensive commute.

First-time buyers

Lock-up-and-go lifestyles are favoured by many, but once millennials start families they might opt for a small house in an estate as opposed to the freehold home with a garden that they might have grown up in.

The affordable property market is based on an average price of R700 000 or less and a total of 94.2% of these properties are freehold, according to Lightstone, the provider of data and analytics for the property industry. They say 31.1% of the affordable market is situated in Gauteng, 13.8% in the Western Cape and 13.8% in KwaZulu-Natal.

“The average age of the first-time buyer is 34 years. The average price of a first home is R944 000,” according to Kay Geldenhuys, Head of Sales Fulfilment, at ooba home loans.

More banks are now willing to offer 100% loans to first-time buyers especially if the purchase price is below the R1 million mark.

Affordable areas

Areas that have traditionally been in demand have seen great return on investment but the flipside is a lack of stock or increase in selling prices, forcing people to look elsewhere for low-cost houses for sale in good locations.

Buyers entering the property market are likely to find opportunities for their first purchase within the affordable housing sector. “Here in Cape Town affordable means well above R1 million. In Gauteng it’s probably R1 million and less,” says associate professor Francois Viruly, property economist with the UCT-Nedbank Urban Real Estate Research Unit.

Where to look

  • Johannesburg: East Rand, Randburg, Johannesburg South up to the greater Fourways region
  • Pretoria: Equestria, Moreleta Park and Mooikloof Ridge
  • Centurion: Amberfield and Raslouw
  • Durban: Amanzimtoti (south), parts of Glenwood and Morningside (central)
  • Cape Town: parts of Parklands (west coast), Burgundy Estate (northern suburbs)

Former holiday towns, such as Hermanus, are also attracting more permanent residents looking to invest in affordable housing to escape the city grind, traffic congestion and urban expense. And once private hospitals and schools start being built in those smaller towns, they become even more attractive to those looking for a more stress-free lifestyle away from city life.

What to buy

  • Mixed-use developments – In the Johannesburg CBD, Jewel City is targeting the lower income level with its mixed-use housing concept while Thirty Keyes, in Rosebank, is attempting to reintroduce shared spaces such as gardens and pedestrian walkways.
  • Micro units – These are between 20% and 30% smaller than a conventionally sized studio.
  • Apartments – These often offer more security than freehold homes.

Take advantage of the market as it opens up to offer more opportunities to invest in your dream home. South Africa’s leading home loan comparison service offers a range of home loan calculators to help you establish what you can afford. Click here to access ooba’s free, online prequalification tool, the ooba Bond Indicator. Then, when you’re ready, you can apply for a home loan with ooba.

How much can you afford?

Calculate the home loan you are likely to qualify for and how much you can expect to pay monthly on your bond repayments.

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Effective 1 April 2018, by order of National Treasury, Value-Added Tax (VAT) will increase from 14% to 15%.

Please note that this increase will retroactively effect VAT-inclusive calculations in articles contained in our website.

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