Undervaluation of Real Estate Properties in Disadvantaged Areas in the City of Johannesburg

Since the end of apartheid, the growth of the real estate market in the historically disadvantaged residential areas of South African cities has been quite remarkable. Transactions in this property market, which can take on several forms of exchange of ownership or occupation, in many respects defy de Soto's definition of dead capital. Yet, despite this booming market, large parts of these residential areas are still regarded by local government as having no capital value. Although the titling of properties cannot be regarded as the only or even the main immediate solution to alleviating poverty within these communities, it certainly presents a real and immediate potential opportunity to many of them. This paper attempts to determine the potential size of this market. It starts with perspectives on land values, the property market and the titling of informal properties and examines different methods used in the evaluation of properties both in the formal and informal residential sectors. Drawing on empirical literature and research findings, the paper makes an attempt at establishing the form and value of what is regarded as the degree of undervaluation of real estate capital by the local authority.