Homes for the missing middle
“Urban developers and estate agents need to change their mindsets and provide affordable accommodation for the missing middle,” says Western Cape Property Development Forum chairperson Deon van Zyl
A change in attitude by developers and estate agents can provide appropriate aﬀordable accommodation in CBDs to commuting workers, making for a resilient urban economy. The “aﬀordable housing” label should change to “aﬀordable accommodation” so the industry can provide the correct type of housing to match diﬀerent phases in tenants’ lives. This will provide developers with real business opportunities and boost their bottom line. Adapting mindsets will help meet local government challenges in a changing economic and political scenario and deliver a necessary housing service to commuting urban workers, who can shift their spending from transport to urban rentals. The Western Cape Property Development Forum is a voluntary organisation of developers and property consultants that operates in the Cape Town metropolitan area and the Western Cape.
The forum focuses on the production line of property development, for example the statutory processes that lead to developers breaking ground, and procedures that aﬀect giving occupation and transfer to end users.
Affordable accommodation: who could the target market be?
- Central city ofﬁce
- Teacher worker
- Down-sizer choosing an urban lifestyle
- Junior government Call centre staffer ofﬁcial
- Shop manager
- Young professional
- Bank Clerk
Understanding trends and identifying new development opportunities is critical to the developer looking for return. Predicting market forces and trends is essential, bearing in mind it can take years to move through the quagmire of statutory processes. The danger is: will the market need to exist or remain the same in a fastchanging environment? And if that environment is a successful CBD created by attracting investment and development, how do we ensure its resilience? The ancient Greek philosopher Heraclitus is credited with saying “the only thing that is constant is change”. In politics and business, the inability to predict or pre-empt with reasonable certainty is referred to as risk.
The past year has been interesting for the property development industry – perhaps more of a Chinese curse than a blessing. Not only must it deal with the eﬀ ect of the changing international context, it must try to understand the impact of the recent cabinet reshuﬄe and downgrade to junk credit rating status. At the same time, developers need to deal with ongoing changes to planning legislation, zoning regulations and new policies, not least the implications in Cape Town of Transit Oriented Development and an anticipated policy on inclusionary housing. Everything is in ﬂux – what do we do?
“If you think it can be business as usual, even if you believe the local residential boom will continue, take note: the political context has changed”
The people who work in the Cape Town city centre ﬁ nd it diﬃcult to live there. They feel excluded from the economy. Professor Francois Viruly, associate professor at UCT’s Urban Real Estate Research Unit, coined the phrase 40 x 40 x 40 — 40% of income spent on 40km of travel to live in a 40m2 house. Figures collated by Cape Town’s Central City Improvement District (CCID) show the average residential sale price per square metre across the ﬁ rst six months of 2017 is R35,700, not the R60,000 or R70,000/m2 sometimes quoted in the media. The bulk of rentals are less than R20,000 a month. If anything, sales prices are stabilising and there is not much movement in rentals. Lifestyle choices make the CBD attractive, but salaries are not supporting growth in rental prices.
WHERE IS THE MARKET?
Are we chasing a sustainable market or are we heading for a bubble? Developers aiming to bring new residential property into the CBD market need to be aware of where that market lies, what it can aﬀord and what it is prepared to pay. There is a need to deﬁne “aﬀ ordable”. Tough decisions are being made because it cannot be business as usual. If you think it can be business as usual, even if you believe the local residential boom will continue, take note: the political context has changed. Grassroots murmurs inform us there is a change in the political mood. But there is also opportunity.
RESIDENTIAL SECTOR BOOM
The golden goose of the past few years has been the residential sector, speciﬁ cally refurbishments of commercial buildings into residential, and new construction supported by a change of view on densiﬁ cation. However, there are hard questions: • What happens when only a few can aﬀ ord commercial space in the CBD? • If you refurbish all commercial buildings for residential, where will oﬃ ce users go when market demand increases? If you sectionalise buildings for residential, what are the chances such buildings will ever be redeveloped? • What happens when the cost of maintaining sectionalised buildings becomes excessive, leaving multiple owners unable to agree, for example, on a lift refurbishment? I think there is an incredible opportunity staring us in the face – aﬀ ordable accommodation. Joe Cortright, writing for citylab.com, says the sum of accommodation and travel expenses tends to be constant: the less you spend on accommodation, the more you tend to spend on travel, and vice versa.