04 Mar 2013
In its bid to continue to provide decent housing at affordable prices, FNB Commercial Property Finance (CPF) with partners Kiron Projects launched the Windmill Park Estate project in Boksburg last week.
The estate offers secure two bedroom and three bedroom homes priced from R285 000 to R340 000.
Rentals are priced at R2 850 for a two bedroom unit and R3 200 for a three bedroom unit.
Carollize Laing, FNB CPF head of Residential and Affordable Housing says demand for housing remains high, particularly in metropolitan areas as a result of rapid and continued urbanisation.
While subsidised housing (Breaking New Ground) is aimed at families earning up to R3 500 per month, the income bracket between R3 500 and R15 000 is known as the affordable housing segment, and homes can be acquired through a combination of government subsidies and conventional mortgage bond finance.
The challenge in the South African housing market is the so-called GAP market - households earning between R3 500 and R7 500, simply because no stock is available at prices that these households can afford.
“It is impossible to build houses at prices which would suit this segment, unless land and infrastructure costs can be minimised,” she says.
This segment of the market is therefore reliant on rental tenure as opposed to outright ownership, which is exactly what Windmill Park Estate offers, she explains.
The estate encourages a sense of community through the provision of play areas for children and open park areas. It furthermore offers safety and security to its residents and makes it the ideal place to raise a family.
“FNB is very proud to be involved in such an exciting development such as Windmill Park.
“This is just one of the many flagship projects we as a bank are in involved in, and we will continue to add value and sustainability to the growing Affordable Housing market,” says Laing.
Renting or buying
Windmill Park Estate encourages a sense of community through the provision of play areas for children and open park areas.
It offers safety and security to its residents and makes it the ideal place to raise a family.
According to Michael Page, general manager of Kiron, developers of the estate, there is Phase 1 consisting of 332 units (all rented out) and Phase 2 which consists of 498 units of which Phase 2A consists of 247 units and in Phase 2B 251 units which they believe will be fully occupied by August 2013.
There is an additional 1 000 units planned for Phase 3.
Kiron was established in 1942 and has over 20 years of experience in the affordable housing market having developed over 100 000 housing units, included in Ekurhuleni where it has developed more than 20 000 housing units, some in direct partnership with the Ekurhuleni Metropolitan Municipality.
The estate consists of two and three bedroom units with one bathroom measuring 90 square metres and electricity is pre-paid.
In Phase 2, he says 84 units have already been rented out.
“We still believe that there is a tremendous shortage in stock for housing units below R300 000, and need to continue actively in engaging with councils and project funding partners, finding suitable and sustainable solutions into the future,” says Page.
Page says it has always been their philosophy not just to provide a house or an apartment, but a home.
Here’s how he describes a home: A roof to keep out the rain, four walls to keep out the wind and floors to keep out the cold.
However, he says a home is more than that. “It is the laugh of a baby, the song of a mother, the strength of a father. Warmth of living hearts, light from happy eyes, kindness, loyalty, comradeship.
Home is where fathers and mothers are respected and loved and children are wanted.
Where the simplest food is good enough for kings because it is earned and where even the tea kettle sings from happiness, he says.
Page points out that they have found out that some people renting the units do not currently meet the banks’ lending criteria with regards to the affordability of monthly bond repayments and so they encourage these people to build up a rental track record for at least six months, which will be taken into consideration by the banks for approval of home loan finance.
“We will be offering the first freehold units in Phase 1 at a reduced price for a period of three months starting from the 1 March, giving the first option to current tenants.”
He says these reduced prices below the R300 000 threshold, will assist tenants who have by now built up the minimum six months' rental track record required by the banks when applying for a home loan.
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Home loan finance
Speaking to Property24.com, Marius Marais, chief executive officer of FNB Housing Finance explains that there is big need for homes in the affordable housing market in South Africa of households earning between R3 500 and R25 000 per month.
He says the bulk of their deals are mostly in the income regions of between R10 000 and R18 000 a month.
Marais says 10 years ago, FNB Housing Finance was established and the target was to finance and deliver 1 million affordable homes and to date, they have hit the 97 000 mark and will continue ensuring people falling in the affordable market group have access to finance to buy decent homes.
He notes that many of these would-be buyers currently reside in informal settlements, back rooms and some have to share space with extended families.
Although they have similar projects countrywide, he notes that they have been successful in Gauteng, they have national footprints with projects in Soshanguve, Cosmo City and will start with projects in Cape Town soon.
Asked about home affordability in this market, he says the single biggest reason for declining home loans being granted is that many people still cannot afford loan repayments.
Affordability for this market is a huge issue even though the bank does give 100 percent loans and asks for no deposits to qualifying buyers of homes priced below R600 000, he says.
“Financial education is needed particularly at school level as I feel there is not enough information about financial planning in general and home buying costs in particular,” says Marais.
Marais is optimistic about the property market this year and is hoping there will be positive growth.
Currently, the bank has a 20 percent share in the affordable housing market space, and he notes that it is a competitive market.
On bond repayments, he says they are seeing a similar pattern if not better with few defaults and sales in execution.
Challenges in the affordable market
He points to challenges including the scarcity of land (especially in government) as being a constraint in developing affordable homes, however, some locations still have pockets of excellence, a good example being Midrand close to Steyn City in Gauteng.
Laing notes that the sector has also been plagued by dodgy developers who because of greediness, developed sub-standard homes and as such, the bank lends to honest developers with a sound track record in the affordable homes market who build sustainable homes.
She says some of the challenges include infrastructure. While it is all good and well to build these homes, it is not much to use to people when they are far away from schools, hospitals, transport nodes and retail centres for example.
Laing also believes we should be looking at densification as this is global norm, and with land scarcity issues, this could be the answer, she says.
A mindset shift is also required particularly to end-users. As an example, she says Windmill offers rental and sales options, so if you do not qualify right away, it is a good idea to rent and build up a good credit record with the aim to buy at a later stage, she adds. – Denise Mhlanga
Denise MhlangaProperty journalist at property24.com
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