Real Estate Investor Magazine South Africa Real Estate Investor Magazine - July 2017 | Page 33

Example 2 is based on an R9 000 p/m income-band,
where the individual after the Lender/Bank’s credit
and affordability assessment, based on the National
Credit Act (NCA) criteria, qualified for R250 000
home loan:
FLISP AUGMENTS shortfall between the qualifying loan
amount and the total product price; (payment made to transfer
attorneys)
Property Price R250 000
Bank HL Approval R50 000
FLISP as HL top up R250 000
EVENTUAL HOME LOAN AMOUNT R300 000
3 The Affordable Housing Loan
Some major banks offer tailored home loan
packages to individuals earning a single or joint
gross monthly income in the GAP range. As with
FLISP transactio ns, this is only possible for the
acquisition of properties that are registerable in the
deeds office.
4 Pension Backed Lending
Other options open to GAP market lenders
include financing packages structures by the
major banks in terms of which financing is offered
against the security of an applicant’s pension
fund. This is different from mortgage financing
as no bond will be registered over the property.
Strict repayment obligations are imposed as the
bank does not have the security of the mortgaged
immovable property, as is the case in most other
home loan financing options.
Unaffordable “affordable housing”
Market analysts advise that the GAP market is
widening.
The strategic approach adopted by the government
in addressing challenges in this segment of citizens
was the introduction of the FLISP subsidy, an
income-based subsidy, aimed at bridging affordability
challenges to those who qualify for a mortgage from
the banks. At the same time, it made cheap stock
available to this segment, whereby, in certain instances
depending on the municipalities and government
arrangements, some of the land in government’s
hands would have been made available for free for
development of affordable housing.
The dynamics in this segment have however
changed substantially because of the increase in
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the price of entry-level stock. Imagine a home
costing R400,000: an individual seeking to obtain a
mortgage loan will need to earn at least R14,000 per
month. This means, as argued by Oupa Masilela in
SA Property News (“Affordable housing: gap in the
gap housing market”, November 2016), that a bigger
gap is being created in the segment of those earning
between R3,500 to R13,000. The availability of stock
- properties priced between R180,000 and R 370 000
- for this sub-segment of the GAP market remains a
challenge.
And the new gap is not easy to address. Developers
point out that affordable housing is becoming
unaffordable due to, amongst other things, the cost of
capital and the cost of developing land. Due to delays
experienced in enabling sites with bulk services and
basic infrastructure, some developers install these
at their own cost and recoups this expense from
the end-user. Therefore, this has become one of the
main reasons why affordable housing is becoming
unaffordable.
Many therefore argue for new mechanisms to ensure
better use of SA land. Quite a lot of land belongs to
government and making this land available, for free,
can assist to facilitate allocation of such land for
affordable housing developments.
Another challenge in the affordable market
segment that Masilela highlights is the ability to
create a secondary market to lessen the dependency
on the primary market, i.e. new developments in this
market. This will include making title deeds available
to recipients of homes via government subsidies and
giving them freedom to deal with the properties in the
open market; in other words, the pre-emptive clauses
in some title deeds where transfer of ownership was
facilitated via a government subsidy scheme, must be
eliminated.
Local authorities across the country are making
plans to address the need for affordable housing
and government’s involvement by way of renewed
planning and policy in this regard is awaited. Let’s
not allow, in the words of Groundup, (“Most people
can’t afford “affordable” housing”, article on their
webpage) arguing for housing to poor families close
to the city “… that Cape Town suffers from ‘inverse
densification’, where the “poor and working class
black majority live on the urban periphery … far from
jobs, and with poor access to amenities”.
RESOURCES
STBB
JULY 2017 SA Real Estate Investor
31