Low earners bank on R47bn in home loans

Low Earners Bank on R47bn in Home Loans

Banks plan to have spent close to R47-billion to finance mortgages for “affordable housing” by the end of this year.

The Banking Association of SA said the four major banks had spent R39.6-billion by the end of March on financing new homes and providing home-improvement loans for the affordable housing market. The association said banks were well on target to meet and exceed their December deadline for spending the R42-billion earmarked for housing loans for households earning between R1500 and R10000 a month. It said banks had altered Financial Sector Charter projections and, by the end of the year, they expected to have spent R46.8-billion on affordable housing.

An example of the affordable housing efforts of the banks is the mixed-use development, Cosmo City, at Kya Sands, north of Johannesburg. It will have 12500 housing units, made up of fully and partially subsidised dwellings, rental apartments and bonded houses. The houses, aimed at civil servants such as teachers, nurses and police, range from 45m² to 65m². They cost between R180000 and R250000 in 2006, but t oday some of the properties are worth more than R350000.

The Financial Sector Charter housing co- ordinator for the association, Pierre Venter, said two thirds of the R39.6-billion was spent on financing new houses and the remainder on home improvements. Venter said the banks had at first thought that 80percent of the funding would be used to finance new houses.

The 67percent spend reflected the continued problem of a shortage of stock for affordable housing. He said the banking body wanted the government to tackle the issue. It had commissioned two reports on the drivers of increase in the cost of building, and projections of the housing supply between next year and 2013.

The association said its latest research, in 2005, revealed an estimated 650000-unit backlog in the affordable-housing market. But the department of housing currently faces a 2.3million backlog for Breaking New Ground housing. “The commissioned studies, expected to be available in the next two months, are critical for us to assess how much progress we have made in the partnership and what we need to do in future. “The affordable-housing backlog is also under strain from issues of land availability and infrastructure development. “Some areas have not been upgraded to accommodate densification and we need speedy implementation of infrastructure for the new developments,” said Venter. The banking body said it was encouraged by the achievements despite the challenges.