October 2006
The recent revelation by the Department of Housing that banks have to date advanced R16bn of the R42bn they agreed two years ago to lend to low-income earners has once again focused attention on SA’s need for more affordable new homes.
“Families are getting smaller, but the new homes that are being built seem to be getting bigger and bigger and more luxurious which, contrary to what many people think, is a bad sign for our housing market,” says Berry Everitt, MD of the Chas Everitt International property group.
“For home values to keep rising, demand has to keep exceeding supply across the board, and to achieve that, one has to enlarge the pool of people not only keen to buy and get their foot on the first rung of the property ladder, but financially able to do so.
“And this is the market criterion which government and banks were no doubt addressing through their agreement to ensure improved access to home loans for low income earners. However, housing director-general Itumeleng Kotsoane says a major obstacle now to the faster implementation of this agreement is a serious shortage of suitable housing stock.
“In short, although they can now obtain loans more easily, there is very little that low-income earners can afford to buy, and very little new stock being delivered in this market sector.”
This is not surprising, Everitt notes, since high land and building costs mean that the profit incentive currently for the development of affordable housing units is low, and is often further eroded by high holding costs as a result of unwieldy local building regulations or rezoning red tape.
“However, a concerted effort is now needed to resolve this problem because affordable homes are key to the future of the property market in SA.
“If such homes are well-built and well-located they will, in time, appreciate in value, enabling owners to build equity and increase their personal wealth and buying power as well as their ability to scale the property ladder – and, ultimately, to sustain the demand for the mansions that developers love to build.”
(Chas Everitt International, Oct 2006)