June 7, 2006
Homeownership in South African Shantytowns
Today's NY Times has an interesting article on the boom in housing prices in some of South Africa's shantytowns. Fans and critics alike of Hernando de Soto will find some support for their views in the article. Here are some excerpts:
Looking for URBAN AMBIENCE (tarpaper shantytown just down the road)? Check out 21 Jonkerhoek St., a two-story HANDYMAN'S SPECIAL (cracked, boarded-over windows) with LOW-MAINT YARD (painted concrete). And it's IMMED AVAIL (if left vacant, squatters will take over).
Whoops: too late. 21 Jonkerhoek was just snapped up for 140,000 rand, or about $21,000. "Ten or 15 people were interested in buying it," said Glenn Renquest, the agent. "Even when the deal was done, people still called in."
Sellers' markets are nothing new in South Africa, where demand for real estate — and the rise in prices — has been more robust this decade than almost anywhere. But until now the boom was largely confined to middle- and upper-class homes.
Now there are hints that it is spreading to an unlikely venue: townships, the ready-made slums erected by South Africa's former apartheid rulers to separate black and mixed-race citizens from whites. . . .
When Pam Golding Properties, known mostly for selling luxury homes and estates, opened its office here 17 months ago, it hoped to do 2.8 million rand of business each month. This past March, the office sold 4.7 million rand worth of properties, or $700,000. This month it is opening a branch in neighboring Khayelitsha, by far the area's biggest township.
As with most sure things, a cautionary note is in order. Home prices are rising around cities like Cape Town, Durban and Johannesburg, where jobs are more plentiful and governments have invested huge sums in utilities and other basics.
But in rural townships, where jobs and paved roads are nonexistent and the water comes from a community standpipe, rising home prices are a distant dream.
Problems abound even in big-city townships like Soweto and Mitchell's Plain. Demand for new housing is brisk, and banks are sinking serious money into what Americans might call starter-home subdivisions. But in townships, where unemployment can reach into the middle double-digits, poor residents often find they cannot earn nearly enough selling their old homes to make the jump to the next real-estate bracket.
One result is a dire shortage of homes affordable to the working poor. . . .
Spurred by government pressure — and the profit motive — South Africa's four big banks are entering the low-income market in earnest, offering home-loan packages for poor households and financing malls and other retail ventures in long-ignored areas.
The national government has also weighed in. After building thousands of free one- and two-room corrugated-roof homes for the homeless, it has arranged to free up billions in low-cost home loans to the three citizens in four who earn less than about $500 a month.
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