Jul 06, 2012
Raising affordable-housing lending constrained by supply deficitBack
Engineering|Africa|First National Bank|Housing|National Housing Finance Corporation|Africa|South Africa|Bank Predicting|Entry-level Buyers|Finance|Marius Marais
© Reuse this
Homes within the R350 000 to R550 000 cost bracket are in undersupply, with only 15 000 to 20 000 new units entering the market on a yearly basis, despite a market demand of over 600 000.
First National Bank housing finance CEO Marius Marais tells Engineering News that the issue lies not with the banking sector’s aversion to the issuing of loans to first-time entry-level buyers, but rather the ability of these individuals to find a house in their price bracket.
“There is a perception that banks aren’t lending enough, but there are larger factors at play, most significantly the lack of supply. We don’t have a limit as to how many affordable-housing loans we can issue, but we are restrained by market forces,” he explains.
FNB recently reached its R10-billion loan target in the affordable-housing market, which provides houses to qualifying customers with a gross monthly income of up to R18 000, with the bank predicting significant growth in this segment.
To offset the supply deficit, FNB channels around 65% of loans into housing developments which are aimed at growing the number of new houses available, and bolstering the secondary affordable-housing market.
Meanwhile, Marais says that government has a fundamental role to play in creating appropriate market interventions and policies that will play a long-term role in assisting first-time buyers in accessing the market.
He adds that the engagement of the private sector with government has resulted in the devel- opment of a finance-linked subsidy programme (Flisp), driven by government agency the National Housing Finance Corporation, as well as a loan default initiative, the Mortgage Default Insurance (MDI) programme. Both initiatives should be implemented within the next year.
“Flisp will provide considerable assistance to those individuals who would otherwise never be able to afford their own home, while MDI will provide an essential form of government-backed risk cover that will enhance the appetite of banks and enable a greater degree of stable liquidity in the market, creating stable market cycles,” Marais notes.
This backing from the State is set to provide some degree of protection for banks, which face the threat of systemic risks such as the recent global economic downturn.
“The last thing you want as a bank is a property market that goes into heavy cycles during which the institution will make money and take severe losses. The fact that government is the guarantor is significant because it comes with a sovereign credit rating and a capital base,” he says.
Edited by: Martin Zhuwakinyu© Reuse this Comment Guidelines (150 word limit)
Other News This Week News
Recent Research Reports
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
This Week's Magazine
South Africa remains an important manufacturing and export platform for Ford Motor Company, says executive chairperson Bill Ford. However, he adds that other countries on the continent are “becoming interesting”, and that the US carmaker is casting its net wider for...
Germany’s Max-Planck-Society (MPG) and the Max-Planck-Institute for Radio Astronomy (MPlfR) are investing €11-million (about R150-million) into South Africa’s MeerKAT radio telescope array programme. The money will be used to design, build and install S-band radio...
Infrastructure spend in sub-Saharan Africa will grow from $70-billion in 2013 to $180-billion by 2025, says PwC capital projects and infrastructure Africa leader Jonathan Cawood. This is one of the findings of PwC’s Capital Projects & Infrastructure report on East...
Private-owned defence and aerospace manufacturer Paramount Group and the Ichikowitz Family Foundation unveiled its Anti-Poaching Skills and K9 Training Academy in Magaliesburg last month.
The inclusion of Bluetooth to provide sub-three meter accuracy and heightened functionality for users is one of the ways to change existing wireless networks into engagement networks. An engagement network differs from common wireless networks in that it enables the...