R/€ = 15.15Change: -0.13
R/$ = 14.28Change: -0.14
Au 1072.00 $/ozChange: -0.05
Pt 852.50 $/ozChange: 7.00
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?

And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Letters About Us
RSS Feed
Article   Comments   Other News   Research   Magazine  
Jul 06, 2012

Raising affordable-housing lending constrained by supply deficit

Engineering|Africa|First National Bank|Housing|National Housing Finance Corporation|Africa|South Africa|Bank Predicting|Entry-level Buyers|Finance|Marius Marais
© Reuse this

The extent to which prominent lenders can issue loans to individuals entering the affordable housing market is being constrained by the lack of affordable-housing developments in South Africa.

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
Creamer Media Senior Deputy Editor
© Reuse this Comment Guidelines (150 word limit)
Other Construction News
Updated 5 hours ago  Rail group Alstom announced on Thursday that it had signed an agreement to purchase 51% of South African rail company Commuter Transport & Locomotive Engineering (CTLE), for an undisclosed amount. CTLE, specialising in the modernisation of trains, was previously...
Updated 6 hours ago Embattled construction firms, which lost 38% of their aggregate market capitalisation in 2015, are facing more hard times, a survey showed on Thursday. The latest PwC study on the construction industry has shown that the sector is taking strain as it battles lower...
Latest News
Updated 4 hours ago Business confidence has dropped by a full 15 points over the past year to reach its lowest level in five years, the latest Rand Merchant Bank (RMB)/Bureau for Economic Research (BER) Business Confidence Index (BCI) has shown. After falling from 43 to 38 in the third...
Updated 4 hours ago JSE-listed beverage, food and nonperishable packaging manufacturer Nampak’s basic earnings a share rose 3% to 228.3c for the year ended September 30, from 221.7c the year before. The company also reported an increase in group revenue and trading profit of 13%, to...
Updated 4 hours ago As Parliament mulls the new regulatory framework to govern South Africa’s financial industry, the sector is preparing for its promulgation; however, it will require a complete “rethink” of the way regulators guide financial institutions. The tabling of the Financial...
Recent Research Reports
Water 2015: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2015 Report considers the aforementioned issues, not only in the South African context but also in the African and global context in terms of supply and demand, water stress and insecurity, and access to water and sanitation, besides others.
Input Sector Review: Pumps 2015 (PDF Report)
Creamer Media’s 2015 Input Sector Review on Pumps provides an overview of South Africa’s pumps industry with particular focus on pump manufacture and supply, aftermarket services, marketing strategies, local and export demand, imports, sector support, investment...
Liquid Fuels 2015: A review of South Africa's liquid fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2015 Report examines these issues in the context of South Africa’s business environment; oil and gas exploration; fuel pricing; the development of the country’s biofuels industry; the logistics of transporting liquid fuels; and...
Road and Rail 2015: A review of South Africa's road and rail sectors (PDF Report)
Creamer Media’s Road and Rail 2015 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 infrastructure and network, the funding and maintenance of these respective networks, and...
Defence 2015: A review of South Africa's defence sector (PDF Report)
Creamer Media’s Coal 2015 report examines South Africa’s coal industry with regards to the business environment, the key participants in the sector, local demand, export sales and coal logistics, projects being undertaken by the large and smaller participants in the...
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
This Week's Magazine
Additive manufacturing, better known as 3D printing, has the potential to completely change the relationships between individual consumers, professional designers and manufacturers. So argued Loughborough University Reader in Computer Aided Product Design Dr Ian...
Airbus Defence and Space: Military Aircraft has highlighted that its A330 Multirole Tanker Transport (MRTT) has significant commonalities with the Airbus A330-200 commercial airliner, upon which it is based. The South African Air Force (SAAF) once operated a fleet of...
Financial services provider Nedbank launched the second edition of its Carbon Footprinting Guide earlier this month, which is aimed at demystifying carbon footprint approaches and help readers grasp the main concepts of carbon measuring, monitoring, reporting and...
This year marks the thirtieth anniversary of Caterpillar’s first backhoe loader. This also coincides with the worldwide release of its latest-generation F2 series backhoe loader, which was launched at supply chain services company Barloworld Logistics’ Big Dig Day in...
BARRY DWOLATZKY The CPD programme provides advanced skills required locally, and provides a stepping stone to Wits University’s Master of Engineering degree in software engineering
A shortage of software engineers is leading to fewer information technology (IT) projects in private and public sector organisations. This also places a dampener on the economy, as IT is an integral part of business and civil service, says University of Witwatersrand...
Alert Close
Embed Code Close
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks
Subscribe Now for $96 Close
Subscribe Now for $96