Property's next big thing

There is some good news for the property industry as experts believe the next "boom" might be affordable housing….

There is some good news for the property industry as experts believe the next "boom" might be affordable housing.

The so-called gap market, which comprises of households which earn between R3500 and R15 000 per month, has been risky for both developers and financial institutions. However, industry players are now falling over themselves to help accommodate this segment of the market.

This gap market usually earns too much to qualify for an RDP home and too little to be able to apply for home loan and experts believe that there is a shortage of 600 000 to 800 000 homes in this market.

Only affordable housing showing growth

Rob Wesslo, country manager for International Housing Solutions (IHS), says the affordable housing market is the only segment showing attractive growth in the property industry.

The IHS SA Workforce Fund recently raised R1.9-billion for investing in South Africa's real estate, with the focus being on the affordable housing market. The aim is to provide 35 000 affordable units to rent by 2018.

IHS say that only around 20 000 units are supplied per year by the government and some private investors which is not enough to make a dent in the backlog.

"You don't see business queuing for the commercial or industrial sector, but there are queues for this segment because there is such a shortage.

"It's clear there's a need. There's been a perception that people in this market don't pay rent, but if your asset management is good this can be an excellent investment," said Wesselo.
Banks are also joining with FNB and ABSA both providing ways to finance homes in the lower income market.

Few can access home loans

"Research told us that only about 15 percent of the country's households had access to home loans," said the unit's CEO, Marius Marais on Wednesday.

FNB offer a Smartbond package which gives 100 percent home loans to households earning between R3500 and R15 000 per month.

Despite the recession, FNB's profit from end user finance in this market grew by 84 percent in the 2009/2010 financial year.

"We see this as a great market, there's massive demand and a proven business model," said Marais.

Article by: www.justmoney.co.za