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'Affordable' houses no longer cheap

20 Oct 2006

The cost to build starter homes in low-income areas, typically priced between R120 000 and R240 000, has surged by close to 50% over the past two and a half years. By Joan Muller

This price increase is placing huge strain on affordable housing delivery, says Jopie van Honschooten, head of the Banking Association SA's affordable housing initiative. Van Honschooten says lengthy delays in municipal planning, zoning and approval processes have pushed up developers' holding costs significantly. This has seen the price of the same starter home of about 40 sq m rise from an average R132 000 in January 2004 to R195 000 in June this year.

Research commissioned by the Banking Association SA shows that the shortage of affordable homes aimed at households earning between R1 500 and R7 500/month, is currently at around 650 000. Van Honschooten says unless housing delivery is speeded up significantly the backlog could rise to 750 000 units by 2010.

He says SA needs to build at least 135 000 new homes/year over the next five years to close this gap by 60%. Only around 15 000 new affordable homes were built in 2005.

Housing analysts say the shortage of affordable housing stock could increasingly hamper banks' efforts to deliver on their R42 bn affordable housing promise by end-2008 in terms of the Financial Sector Charter. Major banks committed themselves to extending housing finance worth R42 bn to low-income households earning between R1 500 and R7 500/month over five years – from 1 January 2004 to end-2008.

Banking Association SA figures show that in the first two years (to end-2005) banks had extended R17,5 bn or 41% of the R42 bn target. But it seems that major banks have upped their participation in the affordable housing sector in recent months. Earlier this week Standard Bank launched a R700m affordable housing development in Springs, which will house 4 000 families in an integrated community while Nedbank recently signed a subsidised loan agreement with the French Development Agency for EUR40 m (R360m).

The deal will provide housing finance to more than 4 000 low-income households. Nedbank is also in the process of creating a fixed rate product to ensure that low-income borrowers can access finance at more attractive fixed rates than that currently on offer.

Earlier this year Absa launched an R400m housing initiative at Olivenhoutbosch, southwest of Centurion to provide 5 480 affordable units. Meanwhile, First National Bank (FNB) has set aside R1,7 bn this year towards three major housing projects at Glen Ridge in Soweto, Cosmo City near Kya Sands north of Johannesburg and the N2 Gateway project at the Joe Slovo settlement, part of Cape Town's Langa township. This translates into over 7 000 housing units. FNB has also signed a close to R1 bn developer and end-user finance deal at Reiger Park, on the East Rand, which is set to deliver 2 200 housing units by mid-2009. - Joan Muller

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'Affordable' houses no longer cheap

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