TOM EATON | Lightstone Residential Property Index lays bare how Joburg is struggling

There was some pretty spectacular Motshekga maths involved in Panyaza Lesufi handing 73% of his Gauteng cabinet posts to the ANC despite getting just 35% of the vote in May. But this week another, far more rational number popped up that told a story about South Africa's crumbling economic hub. 

Admittedly, it was a small number compared to some of the huge ones that have come to define a province almost supernaturally cursed with terrible leadership.

Consider, for example, the R30bn owed to Rand Water by residents, or the billions of litres of water that disappear out of broken infrastructure or through illegal or unmetered connections, effectively meaning that only about 55% of the water consumed in Gauteng is paid for. 

Yes, compared to those whoppers, a figure of just -1.4%, reported in the latest edition of the Lightstone Residential Property Index, seems tiny. That is, until you understand what it means.

Lightstone’s index has been a depressing read for Johannesburg ratepayers for some years now: since 2022, it has shown negative price inflation in the city, meaning that prices have been falling since then.

This week’s update, however, confirms Johannesburg squarely at rock bottom among South Africa's largest metros, reporting that the average property in the city is losing 1.4% of its value every year. 

Again, that doesn’t look like a lot. But when you add South Africa's current inflation rate into the mix, you quickly see a massive city in which every homeowner is, on average, watching their largest asset devalue by 6.4% per year. 

For someone who owns a R1m house, that’s R64,000 gone by this time next year (if CPI stays more or less where it is). A R2m house is evaporating almost R11,000 of its owners’ net worth every month. And that R5m luxury McMansion in Sandton? That’s losing almost R900 every single day.

Not surprisingly, the number of properties being bought and sold in and around Johannesburg has plunged.

According to statistics available on Property24.com, the deeds office in 2015 registered 82,675 sold properties across central Johannesburg, Sandton, Randburg, Roodepoort, Midrand, Soweto, Bedfordview, Edenvale, Alberton, Germiston, Kempton Park and Benoni.

In 2020, amid the economic deep freeze of Covid, just 58,126 properties were sold in those areas. Last year, however, that figure dropped to just 54,659, and this year is not looking any better.

To be fair, Gauteng’s provincial government doesn’t control interest rates, and, at 15-year highs, those are definitely strangling property values everywhere.

Averages can also be deceptive: just as not all areas of Gauteng are struggling equally, not all parts of Johannesburg are unsellable. The so-called “low value market”, defined by Lightstone as properties worth R250,000 or less, is still booming, with national price inflation in that sector above 10%.

And of course Johannesburg is not the only city where property is losing value in real terms. When you take inflation into account, almost all the major metros are quietly deflating.

Johannesburg, however, has been deflating longer and harder than any of them, suggesting that it is unique in South Africa when it comes to would-be buyers shrugging and walking away.

Many of those who are walking away are doing so because they can’t afford what’s on offer. Some conservatives insist that the vast debts owed by Gauteng residents to water and power utilities are the fault of a “culture of nonpayment”, but for the overwhelming majority, nonpayment is the result of not having enough money at month end; and people battling to pay for water are unlikely to have the wherewithal to put down a deposit on a property.

For many others, however, the game is clear: Johannesburg might be a place where you can make a pile and have fun doing it, but it’s not somewhere you put down roots.

And why would you, as the city crumbles, ground into dust by its relentlessly terrible political class? Why would any rational person sink their own money into a property ultimately serviced by Panyaza Lesufi and the broken remnants of the ANC, clinging to power whether it knows how to wield it? 

Yes, many hundreds of thousands of Gautengers can’t afford to sell their properties at the current market rate. Millions more can’t afford to buy anything at all. But what nobody in Gauteng can afford is the government that’s just settled in for five more years.