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Riding high on SA property boom

As part of a series on housing in South Africa, the BBC News website's Justin Pearce looks at how a booming property market has created both opportunities and headaches for the country's professional class.

Reggie Nkosi and his child
Professional people are demanding comfortable housing

Ten years ago, Reggie Nkosi made his first venture into the property market when he bought a flat in the Johannesburg suburb of Yeoville.

Today, the former political prisoner and waste management specialist is involved in a property development deal that will see 250 middle-class homes built on currently unused land in the town of Nigel, on the edge of an ever-expanding greater Johannesburg.

Reggie himself has just moved into a lofty five-bedroom house in Houghton, one of Johannesburg's oldest and most affluent suburbs.

He has had the old carpets removed and the paint stripped off the doors - the newly sanded and varnished woodwork glows a warm shade of orangey-brown.

Outside, the previous owner has left a swimming pool, a tennis court, extensive lawns and a rose garden.

Asked whether he sees his latest purchase as the fruit of his professional earnings or of a canny eye for the market, Reggie attributes it "more to sound investment and timing - though of course your professional career helps you to be bankable".

Reggie Nkosi in his garden
The property market is a reflection of the state of the economy, and the fundamentals are solid
Reggie Nkosi

South African house prices have more than doubled in the last five years. This has come against a backdrop of low inflation, with the national currency, the rand, almost doubling in value against the US dollar over the same period.

The result: those who bought property early on now find themselves with assets worth far more than the loans they took out, and the freedom to make further investments.

"The property market is a reflection of the state of the economy, and the fundamentals are solid," Reggie says.

"The key driver is interest rates falling, which makes borrowing easier."

Boom times

The end of racial segregation has created greater demand in areas that were once reserved for the white minority; at the same time, policies aimed at empowering black people have helped create a new class of black managers and businesspeople with money to spend on a comfortable place to live.

Reggie Nkosi's venture into property development can be traced directly to the expansion of South African commerce and industry.

Lilly Mamabolo
I didn't realise that what I was paying in rent, I could have been paying into a bond
Lilly Mamabolo
Johannesburg residents have lived with regular power cuts for the last few years, as Eskom, the electricity utility, failed to anticipate the increased demand.

Now, says Reggie, "Eskom is reviving a power station there [in Nigel] and 500 to 600 people are moving in: professional class people demanding housing."

Comfortable as his Houghton home is, Reggie thinks he might move eventually to Westcliff, which has all of Houghton's opulence with the added bonus of great views.

"You can't go wrong with property," Reggie says, though he acknowledges: "Houses are becoming prohibitively expensive - first time buyers are being squeezed out."

Priced out

One person in that position is Lilly Mamabolo, who aged 28 is ready to buy her first home, but cannot find what she wants at a price she can afford.


Lilly, who works in marketing for a medical insurance company, regrets not having bought a house a few years ago when prices were a fraction of what they are now.

"I always thought let me wait a while. I didn't realise that what I was paying in rent, I could have been paying into a bond."

Lilly has been renting in Northgate, a new area that has sprung up as suburban Johannesburg has expanded northwards.

"There are places I can afford [elsewhere], but I like this area," she says.

"I feel it's safer, and I've lived here a long time. I'm very choosy when it comes to areas."

So instead of moving to another area, earlier this year Lilly invested in a house for her mother in Protea Glen, a new development adjoining Soweto where Lilly's family lives.

The market does allow people who are brave to do things
Slu Gesha

Soweto, built as a black residential area under apartheid, is now seeing its house prices rise, echoing the boom in the formerly white suburbs.

"My mum likes being there where there are people she knows," she explains.

"Protea Glen is a new area that falls under Soweto, but it's more like a suburban area - it's a lovely place, and the value will increase bit by bit. This could help me get another loan."

'Brave'

While Lilly initially hesitated about buying a house, her friend Slu Gesha has dived headlong into the property boom: an engineer by profession, he currently has three houses registered in his name to a value of 4m rand ($700,000) - and that's after already having sold one property.

Slu Gesha
Slu has three houses registered in his name

"The market does allow people who are brave to do things," Slu says.

"I bought the first one, and then looked at where I could move to."

He lives in one house, while the other two he owns are still under construction: the result of a trend among Johannesburg property developers to sell residential units off a plan.

Buyers put down a deposit to secure their property, but do not begin paying off a bond until the building is ready for occupation.

"It's a difficult way of investing. It's not like having cash in the bank - if you need cash you can't just draw it," he says, adding on reflection: "Maybe that's a good thing though."



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