South African financial information website Fin24 reported recently that thousands of South Africans are once again considering leaving the country in search of a better life.
Most, according to a media release from real estate franchise Realty 1 International, advance crime as their main reason for leaving, but the current uncertainty over the future leadership of the country, the deteriorating infrastructure and the high interest rates are equally pertinent to the decisions being made. On top of this, the global demand for skilled workers in mostly first world countries offers an attractive opportunity to embattled South Africans.
A 2002 BBC News article claims that “up to 100,000 people are believed to have left South Africa over the last three years, and 70% of skilled South Africans still in the country say they are considering emigrating, despite government calls for them to stay and help their country.”
The BBC article, according to the release, quotes a University of South Africa study that states that 39 000 South Africans left the country in 1999 to join the 1,6m already living abroad. The South African government's data agency, Statistics South Africa, stated officially that 10 262 people emigrated in the first ten month’s of 1999.
“Official stats that are more recent are difficult to obtain,” says Mike Bester, CEO of Realty1 International Property Group. “If the various claims are to be believed, however, up to 850 000 South Africans have left since 1994, and a further 300 000 are currently in the emigration process.”
And the picture has not changed since then. The FNB Residential Property Barometer for first quarter 2008 shows that 12% of all sellers included in the bank's quarterly survey plan to leave South Africa, up from 9% in the fourth quarter 2007.
“Emigration increases, according to the release, are more likely to be found in high net worth areas where homes are typically priced above R2,5m. FNB's data shows that 18% of all sellers in this price category plan to emigrate.” In fact, emigration is the biggest single reason cited for selling in upper-end suburbs.
People are queuing to attend foreign career expos, says Bester, and countries like Canada, Australia and New Zealand are recruiting skilled citizens. One expo held in September 2007 at Gallagher Estate in Johannesburg purports to have signed up over 9 000 South Africans in one weekend, most of whom would leave the country within the following twelve months.
This flood of middle and upper income earners out of the country, coupled with the effects of the most recent interest rate hikes, has resulted in a glut of properties coming onto the market in main residential areas. Furthermore, the difficulties experienced by potential buyers in obtaining home financing since the June 1 2007 advent of the National Credit Act have resulted in house price growth slowing significantly, and word from the market, according to the release, “is that sellers are having to settle for 80% and less of their original asking prices.”
But it’s not all the proverbial doom and gloom. While the former ‘white’ suburbs are feeling the effect of the emigration tsunami, affordable housing is enjoying whopping returns. According to FNB’s property strategist John Loos, the massive price gains in former township areas are a reflection of a shortage of stock in the affordable housing market, which, he says, is “rapidly becoming less and less affordable”.
“Although not all townships are top of the pile, each of the four major metros show some of its major township regions as having very high house price inflation rates,” said Loos. He quoted the Gauteng townships of Tsakane, Mamelodi, Soshanguve, Kathlehong and Vosloorus, which all recorded price growth of more than 40%, while Cape Town’s Khayelitsha showed 57% growth in the fourth quarter of 2007.
“This bears out what agents who service the affordable markets are saying,” says Bester. “Mandla Sepeng of our Mafikeng branch has experienced such high demand for housing in the under R500 000 price range that he is in discussion with local developers to find ways to build houses and create stock.”
Several towns in Limpopo whose local economies are interwoven with mining activities are also still showing high demand, as the mines bring in additional workers on an almost constant basis.
“Perhaps this could finally be the key that unlocks the affordable housing market,” says Bester. “In theory, when there are only a few people left to buy the upper-end properties, developers could move in and convert or build smaller homes on the same land which will be within the reach of the first-time buyers and those moving up from the townships. And that will stimulate the property market all over again, and so many more people will be able to afford their own homes.”