When it comes to property investment in South Africa, the township property market often gets overlooked. However, what many investors fail to realize is that townships are evolving into fully functional suburbs, presenting exciting investment opportunities. In this article, we will explore the appeal of the township property market and discuss how you can make the most of this promising investment avenue in South Africa.
Township Property: A Growing Market
Contrary to popular belief, the township property market is not new. It has been thriving since the 1990s, and in recent years, it has been outperforming the wealthier suburb areas. Over the past few years, these once underserved areas have witnessed substantial infrastructural improvements and increasing economic activity. This, coupled with rising urbanisation and a growing middle class, has fueled a surge in demand for housing and commercial spaces in townships
Rising Value and Growth Potential
In recent years, the township property market has witnessed steady growth. Reports suggest that the estimated value of the township property market is approximately R240 billion, with an average property value of R174,000. Additionally, there are around 175,000 properties bonded for a total of R22 billion. This steady growth trend is evident from the increase in property prices over the past decade, with prices ranging from R50,000 to R70,000 in 1997 to R240,000 to R280,000 in 2019.
Exploring the Factors Driving Township Property Market Growth
There are several key factors driving the growth and appeal of the township property market in South Africa.
Reconstructed and Development Programme (RDP)
The introduction of the Government’s Reconstructed and Development Programme (RDP) has played a significant role in the township property market. RDP houses, built by the Government for low-income families, are an essential part of the township property landscape. These properties can be legally sold after 8 years of residency. As a result, RDP properties are available at relatively affordable prices, providing investors with great potential returns on investment.
Infrastructure Development
Infrastructure development in townships has been instrumental in boosting the township economy and making these areas more desirable to live in. Improved roads, streetlights, and the development of malls, shopping centers, and transportation systems have enhanced the convenience and attractiveness of township living. The presence of such amenities has significantly contributed to the appreciation of property values in these areas.
Location, Location, Location
Just like in any other investment, location plays a crucial role in determining the success of a township property investment. Different townships offer varying investment opportunities. For example, Umlazi in Durban and Soweto in Johannesburg are currently experiencing significant growth and development. Investing in properties close to amenities such as malls has shown high potential for increased property values.
Risks to Consider
While the township property market presents exciting investment prospects, it is crucial to be aware of the associated risks. These risks can include occupancy disputes, as some residents may refuse to vacate properties, and limited transparency within the market. However, with research, proper due diligence, and working with experienced professionals, these risks can be mitigated.
Investing in township property in South Africa offers promising potential for growth and profitability. The evolving nature of townships, along with various government initiatives and infrastructure development, is transforming these areas into desirable places to live and invest. As with any investment, it is essential to conduct thorough research, understand the unique dynamics of each township, and work with knowledgeable professionals to make informed decisions. By capitalizing on the opportunities presented by the township property market, investors can unlock significant returns and contribute to the growth of these communities. With a burgeoning market offering both residential and commercial opportunities, the township property sector is ripe for investors looking to capitalize on this dynamic and evolving market.
