FINANCE
Revitalising property markets through inner-city investment and refurbishment
By TUHF
South Africa ’ s property sector , in general , has shown poor performance during the Covid-19 pandemic . Property stocks have taken a significant hit , where retail and commercial office space have been hit hardest and even some industrial property holdings have been affected . And none of these markets are showing signs of recovery yet .
Lower-income affordable housing – and inner-city
housing in particular – has performed better than most other property markets in South Africa over the same period . Residential property as an asset class in South Africa , when compared with other international markets such as the US and Europe , is a very small sector . Hence , its performance in the face of the pandemic speaks to the resilience of inner cities , and the opportunities that lie in urban densification .
THE URBAN DENSIFICATION IMPERATIVE
Urban densification is a national imperative . It is happening , as part of a natural demographic trend that happens as countries develop . It happened in Europe in the 1700s , and in America in the 1800s , as people flocked to cities for better access to food , security , entertainment , and services . It is now happening in Africa and South Africa is no exception . But South Africa ’ s urban development , and its approach to making housing investments , have contributed to enormous and unsustainable urban sprawl as people continue to flock to urban areas and inner cities .
Urban densification is also happening at a much larger scale than people may believe . According to the Centre for Development and Enterprise ( CDE ), 70 % of South Africa will be urbanised by 2030 , withmore than 60 % of the country ’ s population urbanised already . However , it must be managed carefully to avoid creating urban decay in the process .
Meeting this challenge cannot be done with the traditional property development approach of building single , large scale and often comparatively expensive projects on the periphery of our cities . Due to space pressures within the existing urban landscape of most inner cities , urban densification must take the form of many less expansive projects that rely on ordinary people with local knowledge for their success . We are seeing small and medium-sized developers taking up opportunities to develop projects between R1-million and R100-million , and we expect this phenomenon will continue .
This means that metros will have to change their processes and redirect their capacities if they are to play a role in managing this trend and ensuring it happens in a way that enables and uplifts communities . Urban management and collaboration with private investors , and the communities themselves will be key to successful urban densification . Such collaboration can also free government resources up to focus on infrastructure development and town planning for these regenerated areas .
In this way , urban regeneration contributes to making better use of existing physical and social infrastructure , as well as promoting local economic development and thus inclusive economic growth .
ACCESS TO GOODS AND SERVICES
Inner cities are multi-sector economies that , when managed well , attract pedestrians , commercial activity , and reliable tenants , and stimulate new businesses . Urban densification in South Africa continues to increase as people seek affordable , decent accommodation with access to physical and social infrastructure , as well as reduced commuting time and costs . The daily commute , for example , sees 20 % to 40 % of South Africans spending 2-3 hours of their day and 30 % of their monthly income on getting to and from work .
As people increasingly move to the inner cities to reduce their living costs and / or gain access to better facilities and amenities , the opportunity to invest in inner-city rejuvenation and refurbishment projects increases . There ’ s room for smaller players in this space to take advantage of this trend by investing in multiple small projects – around 20 units at a time – and refurbish or repurpose existing buildings rather than investing in large-scale green fields projects that require sizeable tracts of open land to build .
A POSITIVE FISCAL IMPACT
The final driver behind inner-city investment is the knock-on effect on the greater economy . To put this into context , while RDP housing developments certainly serve an important purpose , these developments often have a net negative fiscal impact . They require additional services and ancillary infrastructure development in areas that have none , and people living in these developments often struggle to pay for services such as utilities , rates , and taxes .
In contrast , a certain level of urban densification is necessary for economic and social action . It contributes to economic development at a micro level , which is by its nature inclusive . Stimulating the economy in localised spaces – one city block at a time – is critical to uplifting people from poverty . This is what we refer to as impact through scale – developments that bode
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