South Africa’s property market is delicately balanced between, on one hand, increasing gentrification of neighbourhoods, and on the other, making sure there’s enough affordable housing for those with limited means. If you’re a property developer, this affects project viability, planning permission, and the potential profit of specific developments.

It also matters to home buyers. If you’re taking your first step onto the property ownership ladder, you’ll want the most affordable property for your money – ideally in an area where it will hold or increase its value. In contrast, if you're upgrading to a new home for a growing family, you might be looking for a more upmarket property in a gentrifying area – especially one needing renovation. With some improvements, you could increase its value even more.

Here’s what you need to know. 

What is gentrification?

Gentrification is the process of urban renewal in low-income neighbourhoods that have been allowed to decay. These areas are upgraded by developers and homeowners, leading to an influx of higher-income residents and rising property values.

Developers often buy properties that have fallen into disrepair relatively cheaply, allowing them to renovate homes and refurbish the city environment – effectively 'gentrifying' specific neighbourhoods.

Pros of gentrification

• Improved infrastructure and public services
  Better roads, utilities, and amenities – including shops, schools, and healthcare facilities.
  
  
• Growth
  Stimulates local economies by attracting businesses, creating jobs, and increasing property values.
  
  
• Renovation and preservation
  Revives neglected buildings and historic structures, preserving built heritage that that may be otherwise unaffordable to maintain.
  
  
• Increased tax revenue
  Higher values bring higher property taxes, which boost local government revenue for public services.
  
  
• Job creation
  New developments and businesses create employment opportunities.
  
  
• Cultural innovation
  Artistic communities often lead gentrification, revitalising areas through diversity and a local creative economy – as seen in Maboneng (Joburg) and Bo-Kaap and Woodstock (Cape Town).

Cons of gentrification

• Displacement
  Low-income residents may be priced out of gentrifying areas.
  
  
• Increased cost of living
  Rising housing prices are often followed by more expensive shops and services.
  
  
• Loss of small businesses
  Small, community-focused businesses may be forced out by rising rents and competition.
  
  
• Higher property rates and taxes
  Long-term residents (especially retirees on a fixed income) may struggle to afford increased rates.

What is affordable housing?

Affordable housing policies aim to produce more affordable housing units and foster greater community integration. If you’re starting out as a homeowner, or juggling financial needs on a lower income, affordable housing offers better opportunities with access to the same basic essentials as higher-income residents.

Developers can use gains from rising real estate values to create more affordable housing for lower-income families. Ideally, these projects should be located near shops, professional services, schools, jobs, and public transport.

Pros of affordable housing

• Economic stability
  Spending less on housing frees up money for education, healthcare, and savings.
  
  
• Community development
  Revitalises neglected areas by attracting new residents, businesses, and investments – leading to improved infrastructure, better public services, and increased economic activity in the community.
  
  
• Environmental impact
  Many projects use sustainable design and energy-efficient technologies, lowering utility costs and reducing their environmental footprint in the interests of a more sustainable future.

Cons of affordable housing

• Quality concerns
  Cost-cutting – a major concern in the sector – can lead to poor materials, substandard living conditions, and higher maintenance costs.
  
  
• Limited availability
  Demand far exceeds supply. Developers must work on tight profit margins to offer homes at prices that buyers can afford within their income and loan eligibility.

Gentrification vs affordable housing: Cape Town and Soweto

Cape Town is undergoing significant gentrification, transforming historic areas like Woodstock and Bo-Kaap. While this brings economic development and urban renewal, it also raises concerns about displacement, cultural erosion, and social inequality. Luxury developments, especially in the City Bowl, risk making entire areas unaffordable to all but the wealthy and foreign visitors.

In contrast, a research report on Soweto found that urban regeneration can include affordable housing developments. This makes it easier for first-time buyers to enter the property market and can lead to improved services and rising property values. While urban renewal offers many benefits, mitigating the downsides of gentrification requires strong affordable-housing policies that support equitable development, community values, economic growth, and job creation.

Use the Nedbank home loan calculator to find out the size of the loan you could qualify for, then explore the Nedbank home loan that best suits you.

Our expert financial guidance goes beyond helping you buy property. If you’re a property developer – whether you’re focused on gentrifying neighbourhoods or affordable housing projects – the Nedbank Business and Commercial Banking Team can help.

This article is for general information only and does not constitute financial advice under the FAIS Act. Nedbank accepts no liability for any loss arising from reliance on this content. Please consult a qualified adviser before making financial decisions.