Rising wages a prime factor in South Africa's residential property market

Although South Africa is still a country with massive income inequalities (which have been growing for the last thirty years) it is also true that the country’s emerging middle class is expanding fast and since 1994 the number of black middle class people has increased at a far faster rate than ever before — faster than most analysts anticipated. This is having a marked effect on the residential property market, says Bill Rawson, Chairman of the Rawson Property Group.

“Right now we do not have access to the latest figures relating to South African incomes, but working on the data we have, it would appear that the number of middle class South Africans has grown from just over 3 million in 1993 to close on 12 million today. A survey done by the Bureau of Market Research has indicated that, although the vast bulk of the black population still earns well below R50,000 per annum, in the R50,000 to R300,000 income bracket, black earners are now the dominant group.”

This rapid change in the earnings profile of South Africans, particularly previously disadvantaged citizens, said Rawson, can clearly be seen in the home buying patterns of the last three years. In the market for homes valued at R300,000 to R1 million, the value of sales per annum put through by the Rawson Property Group has over this period risen by a staggering 87%.

“Those national estate agencies which, like the Rawson Property Group, were already well represented in the lower and lower-middle income groups have been the chief beneficiaries of this growth in South Africa’s middle class,” said Rawson.

“Those which have belatedly begun to enter the lower and lower-middle home market are now inevitably playing catch-up — with varying degrees of success.”

Rawson said that in these emerging markets, good agents tend to serve as consultants rather than as sales people.

“Their role is not so much to sell — because the buyer always really wants to buy — but to help him understand the financial requirements of the sale and to calculate exactly what he can afford and how, if necessary, he can improve or eliminate an impaired credit rating.”

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