The Affordable Property / Housing Business Series

It is a new year and this year we will look at changing paradigms. With business in SA being tough we need seismic shifts in our society to move the needle. One of the sectors that need a change of perception is the property sector. The people of South Africa – a majority poor country – seem to think that a benchmark property is a R2m+ semi-detached townhouse simply because that has become the norm in some areas.

In this series, we will look at the affordable property and housing business as well as bringing down the cost of building in general. This sector in my opinion has the most potential for profit and disruption in South Africa but it will depend on changing how people think to unlock its full potential.

South Africa is considered the most unequal country in the world. We don’t have a 1% but rather a 0.1% that includes old money, politicians and the nouveau riche tenderpreneurs. There are a handful of people that fall into this category that are self-made but they are so small as it is very hard to become successful and most “successful” are saddled with so much debt (some think that they fall into this category but in fact their liabilities exceed their assets).

With the median wage in South Africa around R13000 (while more accurate than the average the majority still don’t see this) enough to qualify for a R500 000 bond. You have to wonder why most people consider buying into a European perception of SA and aspire for a R2m+ property and don’t let common sense prevail.

On the other side of the spectrum, there is a small and shrinking middle-class one paycheck away from poverty and being homeless and then there is the mass poor and poverty. It is this group that tries to live like the middle income instead of trying to opt for a modest life they live with a “get rich or die trying mentality”. Most die penniless. It is this sector that can make you very rich if you are able to change people’s perceptions and bend their brains away from building castles in the Sky. The middle class spends their whole working lives spending at least a third of their income on a property, struggling sometimes to get by only when they die to leave their houses to often ungrateful children who because they did not work for it do not appreciate its value, this group often aspires to be like the 0.1%. As for the poor, most live in squatter camps sensitively called “informal settlements” because it is so ubiquitous. This group often aspires to be like the middle class. The majority of both of these groups are delusional. Here is why:

Property outside of the major centers is not expensive in SA.  As we speak there are thousands of plots of land available for sale in the ≈ R100 000 price bracket. In Port Alfred there are 1285 m² plots for R59000 (monthly bond repayments: R466, monthly income: R1554) and 2023 m² for R75000 (monthly bond repayments R592, gross monthly income: R1975).

In the Western Cape considered the Monaco of South Africa by people outside of the province due to the fact that the garbage gets collected on time and municipalities do the bare minimum to make a town function, we also have plots starting below R100k. In the seaside towns on the West Coast, hour to an hour and a half outside of Cape Town there are tens of thousands of empty plots starting in early hundreds of 000’s all along the coast from Yzerfontein to Langebaan to Dwarskersbos to St Helena Bay.

A R100k bond has a monthly repayment of R790 and requires a gross monthly income of R2634 to qualify (at least in theory).
So if all this land is available to purchase even to people on minimum wage, domestics workers take home R3700 minimum if they are formally employed cashiers earn a bit more. Why aren’t more people buying property? Is property ownership really out of their reach or have they bought into a dreams and delusions narrative? Why are most cheap plots usually bought by people with existing homes to use as a holiday home?

In the US many professional workers when allowed to work from home due to COVID moved out of expensive and crowded cities and didn’t want to return. Their new lower cost of living meant that they could afford to earn less while maintaining a similar lifestyle. This led to an increased quality of life. So why can’t we apply the same logic and do the same in South Africa?

Why are we not able to build sustainable towns outside of major cities? And why are those that are most successful have to turn to a self-sustaining and self-determination Orania-style model in which farms are divided up into individual plots of land in a community type setup around a common purpose? And why do people complain when certain races build successful self-reliant towns when those complaining are part of the problem by voting ANC? With Eskom and most municipalities nonfunctional is it a surprise that people are going off-grid? If I build a farm for virgins to live on you cannot complain if you are a whore. Go build your own farm for whores just like I did.

All this and more in this series.

In this series, we will look at the affordable housing from nutec houses, to tiny houses as well as bringing down the cost of building in general. I will not look at cheap housing such as “wendy houses” the poor brown mans shack as I want to move away from the status quo.

I want to talk about this not only from a business perspective but also from a buyer perspective, if you go to Property24, or PrivateProperty and sort by minimum price you will see plots starting at R50 000. While none are in desirable areas such as Sandton they are far better than most all squatter camps. But there are also pretty cheap plots in the Western Cape like on the West Coast. Where the plots have actually decreased in value (many people have sold at a loss).

While squatter camps are “closer to opportunity” jobs, schools etc. But what quality of life is there? Many decent areas plots start at R100k. But what thrilling type of existence is there in the middle of nowhere? It’s obviously boring without a shebeen on every corner, and a murder every day and also no slay queens. But if you looking for peace and quiet, there is an opportunity here to live in these areas and start building affordable houses there. This also goes back to the advice I gave about not having children young or ever. With no children, you can live in cheap yet safe coastal areas where there is no school and where people usually go live when they retire.

South Africa has lots and lots of cheap land and I am talking about land that can be purchased with minimum wage. There are hundreds of plots available that can be purchased on a salary of R3500 a month, the problem is that these plots are far away from cities where most of the development is currently focused on Balwin style fish-tank apartments, leaving the only other option to live in a squatter camp.

The elephant in the room is that rural areas need to be developed so that people can find jobs closer, ironically the apartheid government spent more time trying to develop these areas (which were then under the homeland system) than the current dispensation. I am convinced that one can live well in an outlying area and build a business there and there should be scope for building companies in these areas. God knows the quality of life far exceeds what it is to live in a squatter camp.

Now I am not a big fan of “self-determination” enclaves because they are often defined around racial lines but we need to sit down and think for a moment here. The current system is not working. I’m not saying that “self-reliant” villages are the answer because then we could all turn farms into little villages but as we have seen with those places that everyone needs to be on the same page. I have thought about entrepreneur kibbutz-style villages but if everyone doesn’t bring their weight then it doesn’t work.

For that reason, we will be looking at developing independent plots only. We will look at businesses that can capitalise on Cape Town’s by law that allows up to 3 houses on a single erf. If you look at Cape Towns’ suburbs, there are 200m2 houses on 1000m2 plots.

Then we will look at cheaper building styles such as houses built from Nutec. Now contrary to what Bell Pottinger and the 30 percenters on Twitter will tell you most land is actually worthless in South Africa (the time and money it will cost to develop it exceeds value after being developed). In theory, someone earning R3000 a month can qualify to buy an R100 000 plot (R790 a month over 20 years) but whether or not a bank will lend them is another story despite the land being put up as collateral as they do not believe they will be able to recoup the loan amount should they default as in the property will be too long on the market. That is why you often have rich people buying cheap plots rather than poor. By my estimation banks will value a R100 000 plot for sale on the portals at probably around R20k and as low as R5k in those divvied up bush areas. And the bank won’t lend at all. Some land is also worth less than nothing and even costs you as you have to pay rates to the state. This is why people are even unable to get rid of some land for next to nothing.

Will we be able to change perceptions and say “stop the madness”? I don’t know but we can try…