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Township Property Markets: The South African Boom

Published March 27, 2024
1 months ago

The South African property landscape is changing, and at the heart of this transformation is the township property market, which has seen an unprecedented surge in value, particularly witnessed in Soweto. Recent research by Seeff Property Group has highlighted this remarkable trend, indicating that properties in Soweto and other townships have become highly lucrative investments.

In a discussion with Newzroom Afrika, property educator Khali Masooane revealed the extraordinary growth of the township market, where property prices have doubled in just ten years. A modest four-room house in Soweto that cost about R150,000 a decade ago now fetches between R400,000 and R500,000. This pattern of growth is not unique to Soweto; it's a nationwide phenomenon.

Khali Masooane dispelled the long-held belief that townships were merely transient spaces before moving to more affluent areas. With a shift in the mindset, residents are now focusing on reinvesting and revitalizing the spaces they call home. The affordability of township properties, in comparison to metropolises, is especially attractive to the younger generation, who prefer staying rooted in their upbringing environments. A significant statistic that supports this trend is that 40% of property buyers in Soweto are under 35 years old and are mostly first-time homeowners.

Financial institution Stanlib reinforced these findings in their 2023 client note, citing the resilience and growth of South Africa's township economy amidst broader economic challenges. According to the head of Stanlib property, Nesi Chetty, and analyst Ahmed Motara, the township informal economy has not only remained robust but has expanded at a remarkable rate over the past decade.

GG Alcock, an expert on the informal economy, puts the valuation of this sector between R600 billion to R750 billion. He observed that the informal economy exhibits a structure akin to that of the formal economy, with sectors replicated within the townships and informal settlements. A striking example is the spaza and superette sector, comparable to the formal fast-moving consumer goods sector, which Alcock estimates to be worth R180 billion, encompassing over 100,000 spaza shops and nearly 500,000 mobile traders.

As the informal economy flourishes, the earnings and aspirations of those within it rise, boosting demand for higher-end goods. Large retailers listed on the Johannesburg Stock Exchange (JSE), such as Shoprite, Tiger Brands, and Woolworths, are keen to penetrate this burgeoning market. For retailers, the township economy offers a strategic opportunity for growth, with an increasing number of consumers within townships seeking convenient access to formal retail experiences.

In conclusion, the township property boom is not merely a reflection of changing market dynamics but is also a testament to the evolving aspirations of South African consumers. The focus on community investment and the potential of the informal economy highlight a unique path of development that could redefine South Africa's broader economic landscape.

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