International Finance Corporation (IFC), the main global development institution, would be investing $63 million to target affordable housing in South Africa and sub-Saharan Africa. The idea is to provide international housing solutions fund (IHS) that would target support and development.
In light of the recent mini-crisis that the emerging economies are facing, access to quality housing in Africa is a priority for the IFC. The move is going to have a good impact on the real estate sector in South Africa especially with reference to investment, growth and job creation.
The important stakeholders that are being targeted are the people who can get government incentives such as Reconstruction and Development Program Housing, but cannot afford to be in the traditional housing market for reasons such as high mortgage rates. There is also focus on the gap market, which has a huge backlog.
Perhaps, the housing authorities could take a leaf out of innovative setups like Sebonic Financial that rely on technology based method to speed up home financing. By relying on technology, the backlogs can be efficiently managed. Also, the disbursement of funds is made much easier. By improving the procedure for rates clearance, the property transaction process can be made cost effective.
The current mortgage rates in September are unchanged at 8.50 and the consumer confidence is declining. The consumer price index has been forecasted to decrease from 104 to 100.91.
This could have an impact on the housing market which showed minor acceleration during the last month. It increased from 6.3% to 6.4% in August as per the FNB housing index. The increase isn't significant as housing price inflation comes close to the consumer price inflation rates.
With the addition of IFC fund to the market, things could brighten up. This is because it would encourage private investors to have access to the South African real estate market. It would also have a positive social impact as well. The National Housing Finance Corporation has been given the responsibility to collaborate with IFC for the affordable home project.
Markets other than South Africa that would be targeted by the IFC include Ghana, Zambia, Botswana, Namibia and Mauritius. South Africa is already in major trade with Ghana and could collaborate on various levels for this investment.
The Forecast ahead
Based on the trend and the data, the forecast is a tad mixed. If the real estate price growth is kept in constraint, then the forecast would shift towards improvement. The real estate price decline began in 2008 and has been at standstill in 2013. If they remain as such, then the element of affordability would get a boost.
The forecast is also compounded by the issues of growing urban land and lack of infrastructure. Even if the housing rates do not rise too much, the rising municipal rates and utilities tariff pose a problem.
Theres a likely possibility that the real estate building projects move more towards flats and townhouses rather than large scale projects due to the infrastructure issue. This, in addition to the IFC fund, can lead to affordability adjustment in the South African property market.