Black buyer numbers way down in better suburbs
The credit crunch over the past two years has caused the percentage of black homebuyers in Johannesburg’s middle and upper-income suburbs to drop dramatically and is slowing the full integration of these areas.
“By 2007,” says Lew Geffen, chairman of Sotheby’s International Realty in SA, at least 25% of our sales in areas such as Sandton, Killarney and Greenside were to newly-wealthy black buyers, compared to less than 5% just after the first democratic election in 1994.
“Now that number has dropped back sharply to around 15% - even though home prices are down and interest rates have been reduced.”
And the problem is not, he says, that there is any lack of demand. According to the Unilever Institute of Strategic Marketing at the University of Cape Town, the number of “black diamonds” – or middle-class blacks - grew 15% from 2007 to 2008 and their spending power grew by a whopping 39%. Their average earnings were also higher than those of middle-class whites for the first time.
“What is more, one of the most frequently voiced aspirations of successful black entrepreneurs and recently empowered black executives and managers is to own a home in a sought-after suburb.
“In recent years, we have also seen a growing number of black buyers steadily work their way up from the lower income areas that were their original points of entry into the ‘white’ or suburban housing market to second and third homes in more upmarket locations.”
However, Geffen says, sales to black diamonds were among those hardest hit by the credit crunch that followed the global economic collapse late last year.
“Almost overnight, it became extremely difficult to get home loans, and absolutely impossible to get the 100% loans which many black diamond buyers need to finance their purchases. Although they earn well, most have simply not had the time to build up large cash reserves or sufficient collateral to cover the large deposits the banks were asking for, so they were forced to drop their home buying plans.
“And now, even though the banks have started to make 100% loans again, and lower interest rates have boosted affordability, those plans are still being hamstrung by the fierce application of the provisions of the National Credit Act. Consequently, while upmarket sales overall are showing a steady increase, we do not expect the percentage of black buyers in this sector to grow significantly for at least 12 months.”
SOTHEBY’S INTERNATIONAL REALTY