SA Home Loans has entered the affordable housing market in a move that might the address the gap in the market of people earning less than R18000.
SA home Loans is positioned as South Africa’s largest non-bank specialist home loan provider. In entering the affordable housing market, the financier is addressing serious market failure that has caused millions in the middle market to be “homeless”.
This failure has long been identified by authorities but little has come in the way of addressing it. The market failure excludes middle income earners who do not qualify for RDP housing and also earn below the benchmark that is attractive for private home builders. This has caused government to launch a R1bn guarantee fund to address the gap.
“We’re delighted to announce our entry into this fast growing market,” said SA Home Loans Chief Executive Kevin Penwarden. “Now, lower income earners have access to the same innovative, consumer friendly approach to mortgage lending that’s helped more than 150 000 individuals and families purchase their own homes.”
Penwarden said affordable housing was a major segment of the South African housing market, with properties valued between R250 000 and R500 000 making up more than a quarter of all registered residential properties.
“Despite this, there remains a massive shortage of decent affordable housing. This demand has not been matched by a similar appetite in the provision of end-user finance by home loan providers, so we’re confident that our entry improves not only the scope, but also the quality of choice available to lower income buyers.”
He said SA Home Loans was mindful of the fact that many lower income buyers find it extremely difficult to save up for the large deposits required for many mortgages, SA Home Loans is offering 100 percent loans to qualifying customers, with a 20 year term variable interest rate loan. It has also reduced its minimum property size to take into account smaller properties.
Penwarden acknowledged that affordable housing carried a stigma of higher risk, making fund-raising a challenging exercise. “Nevertheless, we have leveraged our fund raising expertise and managed to secure sufficient funding to make us a sizeable player in the affordable housing space. More importantly, our funding structure ensures that we will be in this market for the long term.
“Our competitors make much of the fact that providing loans for affordable housing plays a crucial role in nation-building by allowing more of our citizens to get onto the property ownership ladder.
“We take this as a given and aim to treat them as we would any other customer. Our research and experience has shown us that home buyers, whether they’re in the market for a R250 000 starter house or a R5 million home, want to be treated with openness, friendliness and respect.”
“With our entry into the affordable housing market, we’re looking forward to sharing the stories of a whole new generation of customers as they tell us how excited they are about owning their first home,” Penwarden said.