In a recent study of 2000 households and 400 entrepreneurs in 18 townships and informal settlements it was found that the total value of the housing stock is between R65bn-R70bn, yet almost no benefit is derived from this capital.
This "dead capital" (unrealisable assets which the owners have no formal title to), as the Peruvian Economist Hernando De Soto calls it, means that owners cannot put their homes up as collateral for bonds or other forms of formal sector credit. According to the Deeds Office, only 7,5% of houses in the former townships have been traded in the last 5 years against a norm of 30% for non-township areas.
The study identified a number of reasons for the dearth in secondary market trade, ranging from policy issues and bureaucratic flaws to the attitudes and economic position of township residents. Possibly the prime reason is the lack of title. Other reasons include bureaucratic delays and the absence of institutions such as estate agents or conveyancers. It is therefore understandable that the banks have been loathe to provide home loans on a meaningful scale. They are going to have to find unconventional, innovative ways to lend in terms of the financial services charter.
The survey is important because it should help to open up a range of policy debates which will hopefully result in a range of initiatives designed to address the dysfunctions of the township market.