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Supply of affordable housing grows with R1.85bn development

Posted On Wednesday, 17 April 2013 05:19 Published by Commercial Property News
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JSE-listed construction group Basil Read’s newest residential development in Johannesburg is the latest show of interest for the affordable housing market, which is gaining the attention of government and the private sector.

Supply of affordable housing grows with R1.85bn developmentBasil Read Developments broke ground last month on its Malibongwe Ridge development, adjacent to its Cosmo City development, in the northwest of Johannesburg.

The R1.85bn "affordable housing" project, developed for the Gauteng local government and housing department and the City of Johannesburg, will house more than 5,500 families.

Basil Read says its R3bn Savanna City development in southern Johannesburg, in partnership with Old Mutual, "is potentially the largest private affordable urban-lifestyle development of its kind in South Africa".

While supply in the affordable segment is evidently increasing, concern remains about the accessibility of finance to prospective first-time homeowners.

Limited access to this segment has prompted government to put initiatives in place to unlock the "gap market" — wherein people do not qualify either for loans or free government houses. Typical clients in this sector would be public servants, including teachers and nurses. Measures include the finance-linked individual subsidy programme, which aims to reduce initial home loan amounts to make monthly instalments affordable.

Kecia Rust, of the Centre for Affordable Housing Finance in Africa, says the gap market is a critical issue that should be addressed. The finance-linked individual subsidy programme subsidy "is not delivering at a rate sufficient to satisfy the demand in this market".

"There is real scope for growth in the affordable housing sector, if we can improve the affordability of entry-level bond housing." This is a "critical challenge" for the human settlements department, she says.

The Financial Sector Code, gazetted in November and aimed at increasing access to financial services, says the need for financial institutions to provide home loan finance to low income earners is a "national imperative". The code, which will be used to measure the empowerment progress of the financial sector, says it is also important to stimulate the development of residential units in the state subsidised and gap markets.

Last year, Standard Bank’s home loan book for the affordable housing market grew 30% to R14bn, as first-time buyers entered the market.

The bank’s affordable housing head, Nicholas Nkosi, says there are now "more home-owners in the formal sector than ever before". He says the biggest issue in the affordable segment is not the ability of people to qualify for finance, but "the availability of stock that they can afford", although developers are showing increasing interest.

Standard Bank has also set aside R2bn of funding for affordable housing developments.

Nedbank’s affordable housing head, Jeff Lawrence, says there is "huge demand for affordable housing", although many people can not access financing.

Basil Read CEO Marius Heyns says the company has positioned itself in the social and gap housing sector "where government expenditure over the next few years is expected to increase significantly".

Non-bank home loan provider SA Home Loans entered the affordable market in February when it began offering finance to those earning between R9,000 and R18,000 a month, although it may extend this further to those earning R6,000.

SA Home Loans CE Kevin Penwarden says while the decision to enter the "rapidly expanding" segment has "nothing to do with government incentives", or related pressure, government initiatives have clearly made a positive difference in the market although "it’s been pressure rather than the financial side of things".

"There are some difficulties for people getting access to finance, and we want to come in to bridge that gap," he says.

Mr Penwarden says the supply of affordable housing, a segment which has historically been undersupplied, is accelerating.

"There are now a large number of new developments coming through and so the real constraint has moved from supply to end-user financing." Mr Penwarden says it is "hugely significant" that more people are becoming homeowners. Besides plugging a social need, it is also "an underpin to the economy".

He says that by the end of this year, affordable housing finance "will represent 25% of our new origination lending".

Source: BD

Last modified on Monday, 03 June 2013 08:13

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