First-time buyers are finding increasing investment opportunities in the affordable housing arena, if they know where to look.
The rising cost of living, as well as the current strict qualifying criteria implemented by the major banks, makes affordable housing the best option for the majority of South Africans wanting to own their first home. Says Jonathan Acutt of Acutts Real Estate: “While strict criteria by the banks prevented South Africa from plunging into an even deeper recession, those same policies are now preventing buyers in this market from purchasing their first home.”
Adds Willie Els of Standard Bank Home Loans: “There is a huge increase in people wanting to buy in this sector and an immense shortage of stock. While purchasers are resorting to creative ways of buying property, such as joint or co-ownership, with a partner, family members or friends, it is often difficult to find workable models to suit these.” Yet why the delays in meeting the demands of this burgeoning sector of South African society?
Roughly defined as property priced at less than R1m, affordable housing has historically been a sector subject to subsidy abuse and major hindrances in target delivery. Solutions including Reconstruction and Development Programme (RDP) and gap housing have regularly been marred by cumbersome red tape, widespread failure and sorry tales of misuse. For those with ingenuity though, despite the complications, it promises great investment potential.
James Arnott, owner operator of Arnott Consulting, facilitated the launch of Pietermaritzburg’s Beacon Views affordable housing, which, at R450,000 per unit, sold out five years ago. “Although we generally had to ‘sell’ the units many times over before we got a viable buyer, I still get regular calls from interested parties,” he says. “However, even with land at subsidised rates, the rising costs of construction and the need for affordability make for narrow profit margins.”
In Benoni the 2012 launch of the Crystal Park affordable residential development saw spin-offs including the development of supporting facilities and BEE employment opportunities in the real estate industry. “There remains however a definite need for buyer education, prior to the purchaser entering into an agreement with the banks,” says Acutt. “This educational process would not only increase the purchaser’s awareness of their own credit rating, and mean their chances of defaulting on their home loan due to poor financial management would decrease substantially, but it would help maintain and increase property values in these areas in the medium to long term.”
