Low-cost housing developers opt for bourse listings

LISTINGS of housing development companies that focus on affordable and low-cost housing appear to be on the rise, and property commentators welcome this trend in the light of strong demand for housing and a severe shortage.

The latest housing development company to announce it is listing is Calgro M3, which plans to list on AltX next week.

Calgro M3 develops property in the low end of the market as well as cluster developments. One of its focus areas is integrated housing developments offering low-cost and affordable housing.

Low-cost housing, which is fully government subsidised and given away to beneficiaries, refers to properties priced at less than R50000, while affordable housing refers to bonded properties priced at R240000 and more.

Calgro M3 aims to use its listing to raise capital to secure more land, strengthen its balance sheet and raise its public profile.

Two other housing development companies opted for listings in recent months. Affordable, fully bonded housing developer RBA Housing listed on AltX in September, while mass housing group Sea Kay Holdings listed on the JSE’s main board in August.

RBA develops houses for R250000-R700000 and is listing to raise capital to buy land for development. Sea Kay focuses on building subsidised, affordable and bonded mass housing for the government, institutions, mines and private clients.

David Green, MD of commercial and residential property brokers Pace Property Group, says these listings are “advantageous, particularly in the light of expediting delivery of much-needed low-cost residential accommodation. What is important is that these companies maintain high-quality construction standards to ensure durability of the houses delivered.”

As far as the possibility of further housing development listings on the JSE is concerned, he says it is “foreseeable that due to the demand for housing in areas not covered by the existing companies, that the opportunity would well exist for further listings in this market”.

“Listings of various property and property service organisations are bound to become prevalent, as investors view this as a high growth sector. Globally, there is nothing unusual about listings of this kind.”

Property economist Francois Viruly of Viruly Consulting says there are “rungs missing in the housing ladder”.

“Where the RDP (low-cost) housing stops, there are a number of rungs missing until you get to a R200000 house. I think that where the sector will benefit in the next few years is the commitments by the banking sector to play a more significant role in this sector of the market.”

He says that according to Lightstone Residential Indices, the affordable housing sector — properties priced at R250000 and more — is showing price growth of 20%. Viruly says this is double the pace of the rest of the market.

“It is also a market that I think will benefit from the buy-to-let market.

“Under the new National Credit Act, certain households may find it difficult to acquire property, and may well turn to renting. With rising land prices, SA’s housing needs in that sector of the market will need to be addressed in high-density housing, as seen in many emerging countries such as Singapore and China.”

Viruly believes that the “big issue” in the housing sector in the next few years is going to be land availability. This arises largely “out of the urban boundaries that have been imposed around many of cities”.