Banks balk at govt's 'impossible' demands

2011-05-13 06:56

Cape Town - Banks will have to prepare themselves for a scenario in which hundreds of thousands of additional home loans will be granted to people who may be unable to afford them.

Human Settlements Minister Tokyo Sexwale expects banks to grant 600 000 home loans to the so-called gap market over the next 36 months.

On Thursday the minister announced this controversial “directive” at the 43rd annual property conference held by the SA Property Owners Association (Sapoa), where he delivered the main address.

The gap market comprises those households too “rich” for a subsidy home, but too poor to qualify for housing finance. They typically earn R3 500 to R9 000 a month. The intention is for President Jacob Zuma’s R1bn guarantee fund to serve as insurance against defaults on the home loans.

The Banking Association of South Africa (Basa) believes this is an impossible target. Pierre Venter, general manager for banking and financial services at Basa, said the market had no houses available for this gap market. And the department of human settlements has so far not discussed any targets with Basa.

Venter said the lack of housing for the gap market was reflected in the building statistics from Statistics South Africa (SSA), which showed that for the first two months of this year building plans had been approved for only 2 443 new houses under 80m² in size. At the same time, 2 413 houses under 80m² had been completed.

Every year, in all segments, only 35 000 new houses are built, he said. Of these, 20 000 are for households earning R15 000 a month and 5 000 for with an income of R11 000 a month.

He said households earning R9 000 a month could afford a R230 000 house but an entry level 45m² house in the market would cost R300 000.

Banks have not yet come up with a specific product for the gap market, although Sexwale recently said in his budget presentation to parliament that a mortgage insurance product should become available to banks in April 2012.

First National Bank property analyst John Loos said the rate at which banks would grant home loans over the next three years would depend on economic growth and job creation, which are both poor at this stage.

Sexwale said South Africa’s total housing backlog amounted to 2.1 million homes, and the number of squatter camps across the country had shot up to more than 2 700 from 300 in 1994.

The Wendy Machanik property scandal has prompted Sexwale to request that the Estate Agency Affairs Board – which falls under the department of trade and industry – be part of his department in future.

From the time the scandal broke earlier this year there has been no reaction from the department of trade and industry either to that scandal or to the firing of Nomonde Mapetla, former CEO of the Estate Agency Affairs Board.

- Sake24

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  • Beam me up - 2011-05-13 08:01

    Hello!... this is subprime mortgage what lead to the fall of and bail out of Freddie Mac and Fannie Mae in the USA that in turn lead to a world wide recession. Did Tokyo pay attention to what was happening or was he to occupied in counting his money?

      ET AFRICA - 2011-05-13 09:29

      exactly! Its unbelievable he can even suggest that, being a businessman, he should know better ! Maybe he is not that clever after all ????

      Freddie - 2011-05-13 12:54

      But the ANC can do everything better than the corrupt, colonial west... didn't you know that? They are perfect, they know everything... so they think!! The problem is that they are sooo incompetent and stupid that they are completely unaware of their deficiencies. There is not hope with morons like this.

  • Damask - 2011-05-13 08:13

    Are you kidding me? Isn't this what happened in America, when the banks were giving loans to people who couldn't afford them? Take a hike Tokyo

      Wernerkwane - 2011-05-13 10:35

      Tokyo is being unrealistic! Instead of forcing the banks to give money to people who can't afford to pay them back, rather create an environment where these same people earn more money, so that they CAN afford these houses. Win win I say!

  • Dave - 2011-05-13 08:18

    recipe for disaster, they mind as well just give them the money

  • Thabo Matwabeng - 2011-05-13 08:36

    The sub-prime situation in the US started when Clinton decided every US citizen should own a house. This is a noble ideal and something that should be pursued, but he also went to banks to technically manipulate affordability principles to allow people who can not afford houses into the housing market. The SA National Credit Act prevents banks from lending to people who can not afford and SA banks have shown in the past that they are well protected against liquidity shortages due to their conservative capital reserve principles. There has to be a way to give more people the chance to own houses, but not by violating good lending principles. The product gap is also about the actual product, the house, and whether we can be innovative enough to deliver houses at lower costs. It is also a demand side issue: why do we have so many people in low income brackets? For a few reason: high population growth, low education levels, high unemployment, high tax burden, etc. Housing is a structural and systemic issue in the true sense of those two words and, like education, crime, efficiency, etc, it requires a multi-faceted solution that addresses all things simultaneously. Not something the ANC is particularly good at. This is not a simple solution and Sexwale's attempt at a solution looks to be either born from ignorance or as an opportunistic attempt for ANC support in next week's election. I think it is the latter.

  • Patrick Phakathi - 2011-05-13 09:26

    Does Tokyo understand the business of banks in this regard ? Has he researched this and engaged with the banks before proposing it? Mcim he must go jump

  • Leon - 2011-05-13 09:31

    with the increases that unionized workers are getting they would soon be able to afford houses

  • Nuck Choris - 2011-05-13 09:34

    We need to break the strangle hold of the big 4 banks. They are destroying value by not approving home loans or undervaluing property. Maybe capitec could offer some form of home loan package to these persons. Please remember that the defaults are already budgeted for in Zumas 1 billion fund. Seems a no-brainer really.

      Buzzbar - 2011-05-13 13:15

      With the number of defaults the bamks can expect, that R1 Billion will probably last 6 months...

      Enigma07 - 2011-05-13 13:53

      If the government cannot even pay the Hospital's suppliers where are they going to reimburse Capitec for defaulters. Someone will steal from the 1 billion fund.

  • Nuck Choris - 2011-05-13 09:39

    @editor, why is it that with your commments system there is no note to say your "message sent, awaiting approval" or something similar, as per any other normal site. All I get is a rotating circle with no indication if my comment has been sent successfully. Then occassionally I see one of my comments posted ...or not...

  • Pietpetoors - 2011-05-13 09:45

    Can't believe our country is run by such idiots. Where were they the past 2 years. It is these king of loans that caused the recession world wide and now they want to enforce it here. The ANC is masters of mass destruction!

  • moor - 2011-05-13 09:48

    No, you got it wrong. This time it will work because it is a well thought out initiative devised by the best brains the ANC has. Guaranteed to work.

  • Kevin - 2011-05-13 09:57

    Just another politician trying to get votes with a ridiculous atatement that does not stand up to scrutiny.

  • Leon - 2011-05-13 10:44

    R1bn guarantee won't be enough in my opinion. For the 1st year 200000 loans need to be granted if we have the 600000 split equally between the 3 years. If we take the loan amount to be the R230000 amount that people earning R9000 can afford we get the following. 200000 * 230000 = R42bn. Assuming a rate of 9% the interest for these loans in the 1st year would be R4.1bn thus a default of 25% would wipe out the R1bn guarantee in year 1.

  • Waheed - 2011-05-13 10:51

    Desperate attempts to "buy votes". Short term thinking sadly, I'm quite surprised that Tokyo, a man of otherwise high intellect, would take this position. It's just not sustainable. Sell the government elitists' 7- and S-class cars, buy them 3-series and C-classes and pump the extra cash into,say for example, state subsidies enabling R9000/month to afford the houses by assisting them with a deposit, thereby decreasing the monthly costs and interest rates over a shorter period. More people with houses, decrease the number of debtors, and save the environment because Ministers are driving more eco-friendly cars. It ain't rocket science to formulate sustainable solutions!This is what happens when the interests of a few in power impairs their ability to hold the interests of the masses at heart. Is this the African way?

  • Waheed - 2011-05-13 11:06

    A welfare state is not sustainable. These are desperate attempts to by the ANC to cloak the maladministration and poor service delivery by effectively "buying votes". I firmly believe in assisting the poor to empower themselves (more bursaries vs social grants for example) than to foster dependencies on handouts. It is my opinion that the old adage "Give a man a fish..." holds true in this context.

  • memory.maguire - 2011-05-13 14:05

    amazing that they forecast R300 000 for a 45m2 house, but only allow R62 000 to build it....

  • Vee2011 - 2011-05-13 14:15

    i think most of you are overlooking the core problem he is highlight, the fact that squatter camps have overshot - creating more reliance to government. In no way do I suggest that his idea is sound, but because of estate agents who created an artificial market the banks cannot afford to loan people under the R11K threshold money to finance their homes. Now if this issue is not addressed our grnadchildren will be funding RDP house through taxes for years to come.

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