Estate Living Magazine Design for living - Issue 42 June 2019 | Page 40

I N V E S T
&
D E V E L O P
HURRY UP
AND WAIT
The affordable
housing market
has high demand,
low supply, and the
promise of long-term
investment returns.
So what’s the catch?
In 2016, the Government Employees Pension Fund (GEPF)
approved a R10.5 billion facility to lender SA Home Loans in
order to boost public access to affordable housing. Of that, R5
billion was earmarked for public servants, R2 billion for affordable
housing for low-income earners, R2 billion to help SA Home Loans
extend mortgages to other qualifying applicants, and R1.5 billion
for affordable housing developers. ‘We can make good financial
returns,’ GEPF vice-chair Dries de Wit said at the time, adding that
affordable housing is key to economic development, stimulates the
demand for goods and services, and will help grow the economy.
Hurry up
Investing is a long-term game. Gregg Sneddon, the financial adviser
who blogs and tweets at thefinancialcoach.co.za, often emphasises
this point to his clients: ‘Investing takes time,’ he says. ‘Three years
is not “time”. Five years is not “time”. Seven years is not “time”. Start
with 10 years. We tell clients to “do the Mickey Blue”. It’s a reference
to that old Hugh Grant movie where he tried to speak like a gangster
and all he could say was, “Forget about it.” So do the Mickey Blue.
Wait 10 years and,until then, forget about it.’
But while affordable housing infrastructure is an investment that
pays off over the long term, it’s also an issue that couldn’t be more
urgent or immediate in South Africa. There’s a massive demand for
affordable housing across the country, and the market is growing
increasingly impatient. In May, activist group Reclaim the City
followed up their Human Rights Day protest at Cape Town’s
Rondebosch Golf Course by digging foundations and laying bricks
on the Green Point Bowling Green. The group insisted that City
of Cape Town Deputy Mayor Ian Neilson had promised affordable
housing on the land, saying in a statement that: ‘The Green Point
Bowling Green is an example of the City’s failure to redistribute land
and prioritise the needs of poor and working-class residents.’
But what’s the catch?
Learn to wait If you’re an investor, you’ll have noticed three things in what you’ve
read so far: when it comes to affordable housing, there’s a high
demand, a limited supply, and the promise of potential long-term
returns. So what’s the catch?
The Mickey Blue approach is ideal for what’s known as alternative
investments – financial assets like infrastructure and real estate,
which don’t fall into the conventional investment categories (like
stocks, bonds and cash). When you invest in alternatives, you’re
likely to be locking up your funds for a long time. It shouldn’t come
as a surprise, then, that the Old Mutual Investment Group (to pick
just one example) has invested R19.3 billion of its clients’ money
in affordable housing as part of its impact investments. Nedbank,
meanwhile, disbursed R1.2 billion towards the building of more than
2,860 units in 2018 alone. The catch, quite simply, is that while all the pieces appear to be
in place for great gains, the reality is that affordable housing (like
any investment) carries a certain degree of risk. In February 2016,
affordable housing developer RBA Holdings went into business
rescue before posting an after-tax loss of R10 million in the six-month
period to end-June – and that after reporting a R1.8 million profit in
the previous corresponding period. Haunted by horror stories like
that, some investors and developers have been scared off. Recent
developments, however, suggest that they might want to reconsider.