‘House ownership essential for generating wealth’

The study was conducted to understand the social impact of affordable housing development.

Joe Slovo Housing Project in Cape Town. Picture: Nathan Adams/EWN

CAPE TOWN- New research, conducted to understand the social impact of affordable housing development, has identified housing ownership as being essential for generating wealth.

Property economist and University of Cape Town Professor Francois Viruly carried out the study and spoke to 567 Cape Talk and Talk Radio 702's Stephen Grootes on the Midday Report.

The 10-month study commissioned by International Housing Solutions (IHS) looked into the social impact of affordable housing development in South Africa.

IHS is a private equity firm dealing with the development of housing, currently focusing on South Africa.

It has financed projects with a combined total value of more than R7.8 billion.

This is the second study undertaken and led by Viruly.

The study was once again undertaken to comprehend some of the benefits that South Africans get out of affordable housing.

Viruly highlights three areas that interested the research team the most.

One was housing as shelter, with particular emphasis on Reconstruction and Development Programme (RDP) homes.

Secondly, the house viewed as an economic unit as well as generating income from the property.

Researchers also looked at housing as an asset class.

"I think for many people, especially those who don't get their title deeds, that house never plays that third role," Viruly said.

The professor stated that not being able to use your house as an asset class stunted South Africans' ability to become economically independent.

"It goes beyond values and investment issues, but to say what happens to your life if you move in there," Viruly added. "The moment you have a house as an asset class, you can use it as collateral and you can start a business on the back of that.

"In our townships in South Africa, we have a lot of bad capital. These are all houses but no one can really use it as an asset class," he continued.

When a house never fulfills its role as an asset class, South Africans are denied the benefits of the property market and the ability to use their homes as collateral to become financially independent, thus denying them the ability to generate wealth.

"I have often called it the '40x40x40 syndrome' in South Africa, that we build 40 square-metre houses, 40 kilometres away from the city centres, where people spend 40% of their income on transport.

"The average South African household at the moment is spending more on transport than on housing. The average household is supposed to spend about 30% of their income on housing; they probably spend more than that on transport," said Viruly.

Location and quality of a house largely, if not exclusively, determines access to social amnesties and overall welfare, one of the study's key findings.

For more on the study, visit www.ihsinvestments.co.za