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IOL News
23-05-2025
- Business
- IOL News
Why multifamily properties are shaping the future of South Africa's real estate market
Inkanyezi Village, Katlehong South. Image: Supplied South Africa's large-scale residential rental property market, commonly called 'multifamily', is quickly emerging as a promising segment of the country's real estate sector. Amelia Dieperink, the head of Commercial Property Finance (CPF), Affordable Housing, Absa CIB, said this was backed by competitive financial returns and reduced volatility, all while addressing a critical housing shortage. She said multifamily presents a compelling investment case. 'The multifamily offering has gained momentum, buoyed by the increasing demand for affordable, centrally located and well-managed rental housing. Institutional investors are taking note. Statistics South Africa reports that 4.5 million households, or 23% of the national population, are currently renting. "Of these, 15% (around 685,000 households) reside in blocks of apartments, pointing to a significant opportunity for scale within the multifamily sector. Multifamily housing refers to institutional ownership and professional management of apartment buildings and residential portfolios. "This model is fast becoming the global standard for urban housing delivery. According to the Centre for Affordable Housing Finance(CAHF) in Africa's recent report, Aligned Interests: The Case for Long-Term Institutional Investment in Multifamily Rental in South Africa, the sector is increasingly robust, demonstrably resilient, and qualitatively rewarding,' Dieperink said. The head said, despite challenges, ranging from service delivery to economic strain, developers have remained committed to delivering quality, well-managed housing with attractive amenities in desirable locations. She said the multifamily model has proven itself to be low risk and defensive in nature when well managed by strong operators, as well as adaptable and responsive, bolstered by innovation in property management and a surge of interest from both local and international players. 'The residential property market is a major contributor to the South African economy, playing a pivotal role in supporting growth, job creation, and meeting the evolving housing needs of a diversifying population,' notes the CAHF report. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. 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Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ For the sector to realise its full potential, Dieperink said, process and structural inefficiencies must be addressed and capital unlocked. She said institutional players, lenders, and policymakers must collaborate to accelerate delivery, scale developments, and enhance regulatory support. Absa CPF said it has been instrumental in supporting the rise of multifamily developments, especially within the affordable housing segment. Over the past decade, it said it has focused on this high-growth area, providing financing solutions to investors and developers across the country while also enabling the transformation of urban centres such as Johannesburg's CBD. Here, obsolete office buildings have been revitalised into thriving, community-based residential spaces, it said. 'The social impact of this investment cannot be overstated. Beyond providing homes, these developments stimulate economic activity, improve safety, and bring dignity back to neglected urban spaces.' Absa added that it has also led the way in embedding sustainability within property finance. In 2023, the bank concluded a R4.5 billion transaction with the International Finance Corporation under the Market Accelerator for Green Construction (MAGC), the first in size of its kind in Africa. More than half of this funding was allocated to affordable housing projects, cementing Absa's position at the intersection of environmental and social impact. Yet, the bank said, despite the sector's momentum, one of its most pressing challenges remains the availability of data. 'Comprehensive, granular, and reliable data specific to the multifamily rental market is lacking. Investment-grade decisions depend on transparency, and for many institutional investors, the absence of detailed analytics has been a key barrier.' Recognising this, Absa said it sponsored the original MSCI compilation of residential sector data in 2018. More recently, alongside Divercity Urban Property Group, the bank co-funded two critical research studies commissioned by the South African Multifamily Residential Rental Association (SAMRRA), an emerging industry body representing thirteen major players who collectively own and operate over 75,000 units valued at over R40 billion. That figure alone represents 11% of the entire multifamily market. Dieperink said as investor sentiment shifts and appetite builds, the focus must now be on scalability. She said that with institutions such as the Public Investment Corporation(PIC) committing capital and financial institutions such as Absa providing finance, the growing imperative shifts to the increase in delivery of quality housing stock. 'Unlocking scale will further facilitate a residential-focused listed REIT structure, improving access to capital while offering the broader investment community a new vehicle for inclusive, impact-driven growth. "South Africa's multifamily rental sector stands at a defining moment. With the right blend of capital, data, and policy support, it has the potential to reshape the country's housing market and, in doing so, drive a broader economic and social transformation,' Dieperink said. According to Mordor Intelligence's South Africa Real Estate Market Analysis, the rental market continues to demonstrate resilience and attractive returns for investors, with gross rental yields in major metropolitan areas like Johannesburg ranging from 6.5% to 9.3%. The report said this robust rental market is particularly evident in urban centres where young professionals and students drive demand for rental properties. 'The market has seen a significant shift in rental preferences, with increased demand for properties offering modern amenities, security features, and proximity to business districts. Property investors are increasingly focusing on developing rental properties that cater to these evolving tenant preferences while maintaining competitive pricing strategies,' reads the analysis. Independent media Property
Zawya
13-03-2025
- Business
- Zawya
South Africa's housing crisis: Why 2.2 million homes are needed immediately?
South Africa has a housing supply backlog of at least 2.2 million units, with a significant shortage in the affordable housing or 'gap market', according to a recent study by the Centre for Affordable Housing Finance (CAHF). The gap housing market is generally considered to be households earning too much to qualify for Reconstruction and Development Programme (RDP) housing but too little to obtain traditional bank-financed homes in the open market. Renier Kriek, managing director at Sentinel Homes, says 40% of consumers fall into the RDP housing category (household incomes below R3,500 per month) and the wealthiest 30% of households are well-served by the open housing market. Massive demand The gap market is the middle 30% of consumers where the supply of housing stock is extremely low and even declining despite massive demand. Kriek argues that a market design error is to blame for this high demand going unmet. Adverse market design disincentivises the holders of capital to invest in affordable housing. The biggest hurdle relates to the unnecessarily lengthy, cumbersome, and expensive processes associated with evictions and foreclosures. The cost of restarting the transaction (eviction or foreclosure) is prohibitive in South Africa and does not align with market circumstances. South Africa should adjust their regulatory environment to favour private-sector investment and the expansion of supply. 'We need to reduce the transaction cost for the holders of capital to take their chances on consumers who are not acceptable risks in the unduly high tenure security environment. In this way, some people will move into the formal housing market and fall out again, and perhaps more than once in their lifetime. If we go through enough of these cycles eventually everyone will be housed.' Kriek admits that this solution may sound slightly callous and counterintuitive to the casual listener. 'The alternative, retaining our restrictive policy environment, is even more callous and is currently barring people from ever getting the opportunity to enter the formal housing market. What use is being born free if you will never realise that constitutionally mandated right of access to adequate housing?' Unintended consequences Another prevalent and reasonably fixable market design problem relates to government subsidies. The Department of Human Settlements has been offering the First Home Finance (FHF) subsidy, previously called FliSP to households in the gap housing market. It aims to subsidise affordable first-time home-ownership opportunities for households with income from R3,501 up to R22,000 per month. It is an inverse means-tested subsidy, meaning that the cash grant is lower the higher the household income becomes. 'Millions of rands earmarked for this subsidy have remained unclaimed in the past and continue to remain unclaimed. This is not because people do not know about the incentive or do not desire it. The first challenge is the relative scarcity of gap housing stock, which is driven by poor demand due to incentives that are adverse to the deployment of capital in this segment, whether by landlords or home-loan providers.' Kriek argues that the subsidy design has unintended consequences resulting in market participants, such as estate agents, being unwilling to sell to subsidy recipients. 'Due to overzealous fraud-prevention measures and perhaps also an unwillingness to integrate into the existing market infrastructure, government has traditionally insisted that the registered title deed contains the name of the subsidy recipient before it releases the subsidy amount.' This means that the subsidy portion is usually received months after the transfer, unlike all other funds in a property transaction which are secured by third party payment functionaries such as banks or attorneys. This makes each property transfer involving a subsidy inordinately complex, and everyone involved prefers doing the same transaction with a consumer who does not rely on a subsidy. Usually, it's the estate agent waiting for the subsidy payment to receive their commission, and that is simply an unacceptable adverse incentive if government's intention is to have the subsidy reach its intended recipients.' Subsidy system chaos Though recent developments seem to favour fixing the market design shortcomings of FHF, the administration of the subsidy remains positively byzantine. There is a national subsidy authority, that can approve and pay subsidies, and a separate subsidy authority for each of the provinces, each with a unique set of rules and procedures and a separate application procedure. This is a quagmire for lower income consumers to navigate successfully, especially where those who rely on subsidies are already viewed negatively by market intermediaries such as estate agents and transferring attorneys. It will take significant political capital to implement market design solutions that can solve the problems facing the gap housing market. If we do nothing it may even get worse, says Kriek, who fears that the current government may not have the ability to adequately diagnose the problem, and much less the political will to affect the necessary policy and regulatory changes. If successful, finding solutions to the housing supply problem could significantly contribute to job creation, supporting the government's recent efforts outlined in the President's State of the Nation Address. All rights reserved. © 2022. Provided by SyndiGate Media Inc. (
