Roxzanne van Eyk
14 November 2008
Johannesburg — THE growing black middle class, known as black diamonds, have provided a welcome avenue for expensive property sales.
THE term black diamond was coined in 2005 by the UCT Unilever Institute and TNS Research Surveys to describe SA's black middle class after a survey highlighted the increasing buying power of this emerging market.
In 2005 UCT Unilever reported that there were about 2-million black diamonds, which increased to 2,6-million in 2006 - a 30% increase. The survey estimated their spending power at R130bn.
Last year UCT Unilever reported an additional 30% increase in the number of black diamonds in SA, with a spending power increase of more than R50m to a total of about R180bn.
The survey attributed some of the major growth drivers to the effect of Black Economic Empowerment (BEE) and employment equity, as well as preferential procurement and skills development policies.
Although this year's black diamond report recorded a slower growth rate of 15%, there was a 39% increase in spending power to R250bn.
Professor John Simpson, director of the UCT Unilever Institute, said despite dire predictions that this sector of society is facing a financial melt-down due to debt pressure, the opposite is true. In the report the black diamonds were described as recession-resilient.
Commenting on the slowdown in the number of black diamonds, Rudo Maponga, Black DiamondTM Research Manager at TNS Research Surveys, said this fall should be seen in context.
"We are working off a bigger base, which means that growth will inevitably slow in percentage terms. What's also significant it is that despite the downturn their spending power has continued to grow, which suggests that this segment is becoming wealthier."
Towards the end of last year, Mick Joyce, Pam Golding Properties' MD for the Western Cape metro region, said a characteristic of the black diamonds is their desire to accumulate assets, with property being one of the primary objectives.
He said just under half have already migrated out of the townships and into metropolitan suburbs, with key drivers being the need to be close to work, the desire for better security, and the need to be zoned for good schools for their children.
"We anticipate that this sector will keep growing at a rapid rate as new entrants move on to the ladder of increased consumption and existing members advance further up as their education levels, employment levels and therefore potential spending power, increases."
In the second quarter of this year, John Loos, property strategist for FNB, released a racial profile of suburban home buying that showed that 50% of the total buyers were white and just above 30% were black. The remaining buyers were coloureds at just below 10% and Indians at just above 10%.
Research released by Lightstone Risk Management in August indicated that over the past decade the number of black property owners has increased by more than 60%.
The Lightstone report showed that 36% of all property owners registered with the deeds office last year were black, representing a 63,4% increase from 1997 when the percentage was recorded as 22%. In addition, the report showed that 47% of new property buyers between 1997 and 2007 were black.
On the Property24.co.za website, Kura Chihota, executive director of the Leapfrog Property Group, recently warned that this data might be giving the wrong impression of transformation within the property industry.
To set the record straight, he said that many of the deals are formalisations of township leases and activity in poor rural areas, often of an RDP nature.
Perhaps a better indication of black diamonds entering the middle to upper sectors of the property market is that 10% of black homeowners have bought in estates, according to the Lightstone data.
About 2% to 4% of these bought in wealthy areas while the remainder are in what the Lightstone research team describes as comfortable areas.
The researchers defined black diamonds as middle class black South Africans only (not coloured or Indian);
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