Banking Associations' lending on track

Posted On Wednesday, 04 July 2007 02:00 Published by eProp Commercial Property News
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Eighteen months ago few industry commentators believed that South Africa's banks would be able to deliver on their R42bn affordable housing promise by end-2008

Lindiwe Sisulu

At the time it seemed that banks and Government were heading for a stalemate, as Housing Minister Lindiwe Sisulu regularly berated banks for not doing enough to become involved in the affordable housing sector.

But latest Banking Association SA figures show that banks have since considerably stepped up lending to low-income earners. By end-March 2007, SA's major banks had already granted mortgages worth R29,6bn (unaudited figures) to families earning between R1 600 and R8 600/month.

So banks are, in fact, slightly ahead of target, says Pierre Venter, co-ordinator of Banking Association SA's affordable housing initiative. Major banks and Government signed a Memorandum of Understanding in April 2005, in terms of the Financial Sector Charter, whereby banks agreed to extend R42bn for affordable housing in the five years to end-2008.

Venter says if banks continue to lend at the current rate, chances are "pretty good" that the R42bn target will be met. However, Venter says it all depends on how many affordable houses - typically priced between R100 000 and R250 000 - can be built over the next 18 months. The few developers that haven't shied away from the traditionally high risk/low margin affordable housing sector simply can't supply new stock fast enough.

But Venter says both the banks and the Department of Housing have over the past year embarked on various initiatives to try to speed up housing delivery. While banks are getting increasingly involved on the land supply and development side of the delivery process, the Housing Department has introduced measures to fast track municipal planning and approval processes.

Venter says delays are most prevalent in the "land to stand" phase, including the proclamation and rezoning of land identified for housing and the provision of bulk infrastructure and services.

It currently takes five years on average to complete the entire housing delivery process, from identifying suitable development land until the structure is finally ready for occupation. Venter says the aim is to reduce the turnaround time to 30 months.

Even so, there's no denying that SA still has a long way to go to address its housing shortage. Research conducted by independent housing analysts Matthew Nell & Associates, in partnership with the Settlement Dynamics Project Shop, shows that the shortage of affordable houses - aimed at households earning between R2 500 and R7 500/month - stands at around 650 000. The report states that SA needs to build at least 135 000 new houses/year to start closing that gap.

That would mean a five-fold increase in the current delivery rate. Latest Statistics SA figures show that only 24 233 new affordable houses (classified as houses smaller than 80sq m) were built last year. But more disconcerting is that the outlook for housing delivery looks equally bleak, with building plans passed for affordable houses down 15% in first quarter 2007 (year-on-year).

Last modified on Wednesday, 12 March 2014 15:08

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