SA homeownership set for huge growth

Homeownership set for growthThe residential property market is set for enormous expansion over the next few years, on the back of huge growth in SA’s black middle class.

Just-released research findings show that the number of adults in this group has more than doubled in the past eight years from 1,7 million to 4,2 million, while the number of white middle class adults rose from 2,8 million to 3 million.

The research, conducted by the UCT Unilever Institute of Strategic Marketing, also found that the annual spend of the black middle class already tops R400 billion a year.

What are even more exciting though, are the findings of the survey with regard to changing consumer behaviour in this group over the past eight years – years which have included the global financial crisis and an enduring economic downturn in many parts of the world.

Reporting on the research this month, Institute Director Prof John Simpson explained how tough times and much greater difficulty in finding and keeping employment, have led to a new financial conservatism in the black middle class.

He said respondents to the survey had clearly indicated that it was no longer a case of ‘bling at all costs’. In contrast to the Institute’s studies on the black middle class (Black Diamonds) in the early 2000s, which revealed rampant spending and a huge appetite for short-term borrowing, 80% of participants in the latest study – entitled “Four Million and Rising” – reported being much more cautious about spending and “only using credit when something was absolutely essential”.

This is a very positive development from the real estate point of view, because it suggests that far more consumers are now getting a handle on their financial affairs, getting rid of short-term debt, and putting themselves in a better position to save deposits and acquire homes of their own.

In other words, as First National Bank recently noted, they would appear to be “reprioritising” their household spending – as already indicated by the fact that spending on household goods and services is declining, new car sales are down, and the rate of unsecured lending growth is dropping.

Obviously, there are also rising demands on household incomes from other sources, such as increased food, transport, and utility costs – but it is the high levels of household debt which are currently the real barriers to homeownership for many families, because the repayments chew up a very large proportion of their disposable income.

And since there now appears to be a new and growing willingness to eliminate credit and store card debt, to stop buying furniture, cars, and other goods on credit, and to stop taking out personal loans to fund a lavish lifestyle, the black middle class has the potential to raise housing demand – and home ownership – by literally millions of units over the next few years.

  • Meanwhile, some 400 000 low-income households are also set to become new homeowners over the next three years, according to budget documents recently tabled in parliament by the National Department of Housing, which will spend R32 billion on new houses this year. Many of these owners may never be able to upgrade to more expensive, bonded properties, but the fact that they have a proper home and security of tenure will improve their lives and those of their children, which is the most important benefit of homeownership.
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