Customary property rights and urban property values: Insights from Ingonyama Trust lands in Durban, South Africa

Africa is urbanizing rapidly. In many cases, cities are expanding into areas where land is held under customary tenure, which differ in important ways from the ‘transparent, secure, and alienable’ private rights that underpin most models of cities in urban economic theory. This paper therefore asks: how does customary tenure shape the development, use, and value of land in urbanizing areas? Drawing on a unique data set of 1400 households in eThekwini Municipality, Blinder-Oaxaca decomposition analysis is used to examine observable differences in characteristics and values of housing located in legally recognized customary areas with those that are not. The results provide a rare empirical snapshot on urban development patterns in this context, revealing variation in housing values across these two areas that is largely attributed to differences in public services rather than factors that are widely linked to individual investment decisions and tenure security, such as housing size and quality of building materials. We also find tentative evidence of a price discount for housing on customary land in densely urbanized areas and a price premium in more rural locations, raising questions for further research on the interaction between property rights and spatial transformation.