South Africa’s low-income earners will have to wait a little bit longer before getting a mortgaged house, as the issue of affordability continues to hamper the housing finance market on the African continent.
Though the affordable housing market in South Africa is defined as households earning between R3 500 and R25 000 (about US$350 and US$2500), First National Bank (FNB) said last week that currently there is no supply of houses to a household earning between R3 500 and R9 000 in the country.
The bank’s survey shows that 96% of people knocking on its doors for a financed house are first-time homeowners who are most affected by issues of affordability and economic risks such as interest rate increases, inflationary pressures and unemployment.
The African Union for Housing Finance (AUHF) recently identified affordability of formal housing as one of the key areas where governments, private sector and development finance institutions should urgently focus on to enhance the performance of Africa’s housing markets.
AUHF called on development finance institutions to provide additional capital, technical assistance and targeted risk-sharing mechanisms.
“Lending is critical to the growth of sustainability human settlements, and also a mechanism to control rising levels of inequality,” AUHF said.
South Africa is a country of social contrasts and the world-second most unequal society after Brazil.
FNB, which has financed over 100 000 affordable housing units in South Africa over the past 10 years, said the country’s entire home loan market comprises of about 14 million households.
Of this 9 million households earn less than R3 500 (US$350) per month and qualify for fully subsidised housing, the bank said.
“Above this layer lies the affordable housing market, which according to our research comprises of around 4.5 million households of which there is a demand for around a million new homes,” FNB Housing Finance CEO Marius Marais said.
AUHF said that households can contribute towards the realisation of their housing needs whether financially or labour.
Millions of poor working South Africans who have waited in vain for government’s ‘free houses’ for years have now begun to turn to banks to help them get a decent home.
Unfortunately, their insignificant monthly income hampers their chances of making their dream come true.
Therefore, FNB, one of the country’s biggest commercial banks, is seeking ways of putting a smile on these people’s faces.
Marais said: “We are looking into developing different ways of financing this market combining a mix of different financial options that can really serve this market’s housing needs.
“It is essential to start building more units at the right price level to meet the market demand.”
Marais also said FNB was in the process doing work around building specifications with players in the supply chain with a view of finding a lower priced design.
“This may also mean reducing the starter home size to below 40 square metres,” he said.
Photo: by Moladi