Housing in Southern Africa

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October 2015
From the highs of 2010, the sector
delivered 16 400 units which rep-
resented R3,92 billion, in 2011
a whopping 19 700 units rolled out
worth R5,4 billion; in 2012, it dipped
to 15 000 units worth R3,9 billion
with less than 0.01% FLISP subsidy
units. In 2013, the market delivered
12 600 units at a value of R3,38 billion,
which includes 12% FLISP units. This
dropped significantly in 2014 to 10 200
units and between 2014 and the first
two quarters of 2015, the Gap housing
sector dropped to 4 100 units worth
R1,1 billion.
“This sector of the market,” says
Venter, “is for first time home buy-
ers who cannot afford an entry level
home. Developers are unable to
build a 45m² unit on a 150m² site for
R300 000. The differentiation between
a fully subsidised government BNG/
RDP house and a FLISP unit is that it
requires a price tag of R350 000.”
He breaks down the development
costs with municipalities charging
R14 000 per site for provisions of civil
services and Eskom charges R20 000
per site for bulk, connector, reticula-
tion and prepaid meter services. He
adds that this is despite the Depart-
ment of Energy providing Eskom with
these subsidies.
Venter says that a serviced site
represents 33% of the overall cost.
Township establishment is another
problem, with timelines over four
years, while the government Red Book
stipulates 27 to 30 month guidelines.
From land to a completed unit varies,
land cost plus 18% for a BNG unit and
cost plus 25% for an affordable unit.
The challenges he highlights in-
cludes one month for the National
Housing Finance Corporation (NHFC)
to approve a subsidy application. It
can take up to one year for the NHFC
to approve a development.
Another challenge is the Mortgage
Default Insurance (MDI), which was
introduced to alleviate the risk taken
by the banks in the event of Gap and
FLISP home buyers defaulting. Unfor-
tunately, the cost of the MDI premium
is more than the ‘Cost of Risk’, which
lenders price into the interest rate.
Venter suggests that government
consider a long term fixed interest
rate, savings incentive e.g. pension
premium which can be withdrawn
for the acquisition of the buyer’s first
home. And lastly, he says, there needs
to be a change in consumer behav-
iour as the current household debt
to disposable income ratio is 77.7%,
compared to the South African Net
Savings Rate which has plummeted
into negative territory of -2,3%. ■
Drop in housing delivery
Pierre Venter of The Banking Association of South Africa (BASA) in
his presentation at the National Department of Human Settlements
Developers and Contractors Workshop explained the dip in the roll
out of Gap and FLISP partially subsidised housing.
TheSouthAfricanAffordableResi-
dential Developers Association
(SAARDA) says that Affordable
Housing can be a game changer for
the country in job creation and spatial
transformation. SAARDA spokesper-
son and member, Norman Cleaver,
said that the organisation has a five
year plan to partner with govern-
ment’s Housing Development Agency
on mega-scale Catalytic Projects.
Speaking at the National Depart-
ment of Human Settlements Develop-
ers and Contractors Workshop,
Cleaver said that there is signifi-
cant demand for Gap market units
and the backlog has been estimated
at between two to three million, for
householders earning between R3 200
and R12 800 per month.
While in the affordable housing
sector it is approximately 5,8 million
households. These are income earn-
ers between R12 800 and R25 600 per
month. SAARDA has set aggressive
delivery targets to enable Minister of
Human Settlements, Lindiwe Sisulu
to meet government’s goal of R1,5
million housing opportunities by 2018.
In 2014, SAARDA members deliv-
ered 4 406 affordable houses and 440
FLISP units. This will double in 2015
with targets of 8 859 affordable and
2 214 FLISP units. During 2016, Cleaver
anticipates that this will double again,
overtaking 2010’s high of 16 400 units,
to 17 883 and 4 470 FLISP units. An im-
pressive target in 2017 of 21 901 afford-
able and 5 475 FLISP units, and finally,
in 2018 , it tapers slightly to 19 280
affordable and 4 820 FLISP units.
The five year plan aims to provide
72 329 affordable houses and 17 419
FLISPunits. SAARDA represents almost
80% of all affordable housing devel-
opers in Gauteng and is on the road
of expansion and intends attracting
members in other provinces. ■
SAARDA’s on track to deliver Catalytic Projects
Housing