Affordable suburbs at risk of becoming unaffordable
News > news - 14 Jul 2006
Even though the rate at which home prices are rising has slowed down, the furious pace of the past four years has driven many buyers to look anew at "affordable" older suburbs - and the pressure on stock in these areas is growing intense.

"It's basically an issue of affordability," says ERA Real Estate CEO Gerhard Kotzé. "Many first-time buyers were effectively priced out of middle-income suburbs by the rapid appreciation in home values.

At the same time, members of the emergent middle class were demanding well-priced properties, and this combination of factors has turned the market place upside down with demand slowing somewhat in newer, more pricey areas while continuing to increase in areas that were out of the mainstream of the property boom."

He notes that with the average home price in SA now being almost R800 000, the monthly repayment on an "average" home loan would be around R8000 (at current interest rate levels), which in turn implies that the home buyer would need earnings of almost R27 000 a month to qualify.

"On the other hand, there are suburbs in Johannesburg and the other main centres where homes are still available for between R400 000 and R500 000 - and buyers only need earnings of between about R14 000 and R17 000 to afford the bond. What is more, homes at these prices now fall below the transfer duty threshold, which makes them even more affordable."

However, Kotzé notes, this situation is likely to be short-lived - not for lack of demand but for lack of stock.

"Reports from our agents are that in previously downmarket suburbs of Johannesburg such as Bez Valley, Rosettenville, Turffontein, The Hills and Yeoville in Johannesburg, stock is already in short supply and prices are rising steeply.

Similar trends are also emerging in other areas. For example ERA Roodeport's Johan Buys refers to West Rand areas such as Roodepoort North, Roodepoort West and Hamburg where prices are now reaching the R480 000 to R500 000 bracket.

In Cape Town, the Brooklyn area adjacent to Milnerton and Paarden Eiland is another example. Here, three-bedroomed homes sold a short while ago for R290 000 are now realising R550 000 to R600 000 says Gavin Zinn of ERA Cape Town North.

And in KwaZulu Natal, areas that fall into this category are The Point and the likes of Redhill and Rosehill, part of old Durban North, where prices now range from R600 000 upwards, says ERA Unique Durban North's Romanda Sorrel.
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