Think you can't afford to buy a home? Try one of these affordable housing options
Category General News
The affordable housing market in South Africa is limited, making it incredibly difficult for many to enter. These are the options available to first-time buyers wanting to enter the real estate market.
Ewald Kellerman, Absa's Chief Risk Officer for Home Loans says over the last 6 months, "45% of its approved home loans have been for first-time home buyers (FTHB)".
"The activity in the market has increased significantly due to favourable interest rates," says Kellerman who also noted "FTHB applications for 100% lending has increased in comparison to the previous year".
While experts in the industry agree that the current market presents the perfect opportunity for first-time buyers, the reality is that the majority are simply unable to afford the high entry costs.
The Centre for Affordable Housing Finance in Africa (CAHF) states that in 2019, the cheapest, newly built house was estimated at R436,200. Under existing home finance terms, the house would be affordable to only 20.4% percent of urban households. Responding to this research, Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, encourages South Africans to make use of the variety of National Housing Subsidy Programmes available to them to help them afford the costs of homeownership.
READ | How I saved R120k on my bond to become a first-time home owner
"While the variety of housing subsidies and grants available will not solve this problem on their own, they do offer a solution to a number of South Africans who are struggling to enter the real estate market. The trouble is that too few know about these options or that they qualify for the assistance," says Goslett.
"Out of 45 applicants who are first time buyers and whose home loans were approved, only four of these potential home owners knew about available FLISP subsidies," says Meyer de Waal, the founder of My Bond Fitness and a director of MDW INC Attorneys.
A first-time buyer may ask - "How do I find properties before the seasoned property buyers get their hands on them, that are selling for less than market price? The answer is simple - This unique opportunity to pay up to R 123 000 less for a property is available for all first-time home buyers.
'Finance Linked Individual Subsidy Program'
One of these often under-utilised programmes is the Finance Linked Individual Subsidy Program (FLISP). Households who earn between R3,500 - R22,000 per month can apply for this subsidy. Depending on the applicant's gross monthly income, the once-off FLISP subsidy qualifying amount varies between R27,960 and R121,626 (as per the FLISP Subsidy Quantum). Successful applicants will receive this money which can be used either as a deposit or to cover the transfer and registration fees.
"Owning property in a desirable location has always been a challenge for most. Today there is a massive push towards enabling greater property ownership through achievable pricing and education on the purchasing process," says Stefan Botha, Director at Property development marketing agency Rainmaker.
"We've identified the need to bridge affordable property purchasing opportunities for end-users and we're incredibly proud to offer online mortgage approval within only 48 hours, which is then automatically integrated into a FLISP approval for those who apply.
Rainmaker has launched a mixed-use development Hesketh Estate, offering an innovative lifestyle option, with 1, 2- and 3-bedroom options from R699 000 to R999 000, paving the way for a new way of living and for a deposit of only R5 000.
"Our goal is to make the bond approval, grant and purchase process as seamless and as convenient as possible," says Botha.
The availability of affordable homes continues to be an issue across South Africa.
As part of a solution, President Cyril Ramaphosa recently announced his plan to build the Mooikloof Mega Residential City project in Pretoria. Once completed, roughly 50 000 apartments are said to become available for between R500,000 and R800,000.
READ | Mooikloof Mega City | SA's R84bn answer to middle-income housing, but will it bring transformation?
The Soweto housing market also offers buyers good value for their money but is becoming increasingly unaffordable. According to Mahau Motaung, Broker/Owner of RE/MAX Ebenezer in Soweto, the low-income housing market in Soweto has become more like the average middle-income areas as property prices continue to rise along with the availability of cash buyers and property investors.
"Soon, there will be no more land left in Soweto. We will then see the introduction of more duplexes and similar properties, such as those being built in Extension 11 Protea Glen. The way I see it, the Soweto property market can only grow and will soon become the Sandton of the South," he elaborates.
READ | Cape Town's R15bn Harbour Arch to 'include about 100 affordable-housing apartments'
One possible solution for low-income households is to pool their resources so that they have a greater chance of qualifying for a home loan. "To increase their chances of qualifying for a home loan, buyers can co-apply with a partner or family member.
Mpho Ramatong, FNB Home Finance Division Channel Head for Housing Schemes, says lenders do offer consumers an opportunity to apply for a bond with two or more parties. These individuals would co-own the property and share the responsibility to honour monthly home loan instalments.
"Before taking this important step, it is advisable for all potential co-applicants to seek advice from their bank or an expert to ensure that they are adequately prepared for this commitment," says Ramatong.
READ | 4 things to consider when applying for a joint home loan
'Young Professionals Home Loan'
Another option is to purchase a property without a deposit. For the year ending 31 March 2018, 42,76% of all home loans registered through BetterBond were calculated at 100% of the purchase price. ABSA offers a "Young Professionals Home Loan" of up to 105% bond for a property valued at R1.5million or less. The extra 5% helps homeowners afford the registration costs and transfer duties. However, with these options, Goslett warns that buyers will end up spending a substantial amount more on interest charges over the life term of the loan.
These are just some of the options low-income households might want to consider if they are hoping to enter the property market sooner rather than later.
READ | 12J tax break, FLISP or Transactional Wallets | 3 ways to ease into real estate investment
"To help achieve your homeownership goals, it is always best to seek the advice of professionals in the industry. A financial planner can help you create a budget and discover what you can afford. Next, a bond originator can get you prequalified for home finance. Lastly, a trusted real estate advisor can help you find a home within your budget. By meeting with each of these professionals, you can put a plan in place to help you attain your homeownership goals," says Goslett.
Author: Property24