PROPERTY NEWS - The affordable housing market in South Africa is limited, making it incredibly difficult for many to enter the real estate market. 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.

"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

Flisp
One of these often under-utilised programmes is the Finance Linked Individual Subsidy Programme (Flisp). Households that earn between R3 500 and 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 to use either as a deposit or to cover the transfer and registration fees.

Affordable housing
Another issue is often the availability of affordable homes. 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 will be available for between R500 000 and R800 000.

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," says Motaung. "The way I see it, the Soweto property market can only grow and will soon become the Sandton of the South."

Pooling resources
One possible solution for low-income households is to pool their resources so that they have a greater chance of obtaining a home loan. "To increase their chances of qualifying for a home loan, buyers can co-apply with a partner or family member," says Goslett. 

"However, this decision should not be undertaken lightly, as this does mean that they will each co-own the property and be responsible for the monthly repayments."

Photo: www.dhs.gov.za

100% bonds
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 even offers a Young Professionals Home Loan of up to 105% bond for a property valued at R1.5-million or less. 

The extra 5% helps homeowners afford the registration costs and transfer duties. However, with these options, warns Goslett, 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. Goslett says that, 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 pre-qualified 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," Goslett concludes.

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