Property & Wealth

Government agency to boost property market

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What is the state of the South African property market amid the heightening tensions between private capital and the government sector and the knee-jerk flight of foreign capital in times of currency volatility?

Firstly, all the sabre rattling and politicking about foreigners ‘buying up’ South African property are simply based on emotional rhetoric and certainly not supported by solid, researched facts and statistics.

A recent survey by New World Wealth affirms that foreign buyers account for less than 5% of property sales. What is more surprising, though, is the fact that the African continent’s share of total foreign buying has declined mildly from 31% in the first quarter of 2016 to 27.5% in the second quarter.

The 2016 South Africa Wealth Report notes that wealthy African citizens made up the largest share of foreign property owners the country in 2015.

Most of them come from Angola, Ghana and Nigeria. It is expected that more than 10 000 African millionaires will move to South Africa over the next 10 years and in the process bring millions of dollars with them.

The other side of the coin, however, is that more than 8 000 millionaires have left the country since 2000.

PIC’s initiative

Despite this flight of capital, the domestic picture in the property market is much more stable than one would expect.

That is partly due to not only inflows from the rest of Africa, but also domestic private sector investors’ and developers’ interests shown in the Public Investment Corporation’s (PIC’s) R10.5 billion investment initiative into a leading local bond originator, SA Home Loans (SAHL), to bolster its capacity to lend money to government employees.

According to Mashwahle Diphofa, director general of the Department of Public Service and Administration (DPSA), there is plenty of interest being shown by other

agencies and entities, enquiring about how they can play a more meaningful role in this bold and fresh initiative to stimulate demand in the housing market countrywide.

At the launch of the Government Employees Housing Scheme (GEHS), Diphofa

made it clear that the scheme remains open to, and welcomes, other investors. These include commercial banks and other partners in the drive to increase better housing and home ownership among government employees.

The PIC, on behalf of the Government Employees Pension Fund (GEPF), will invest R10.5 billion into SAHL to boost available housing finance for qualifying government employees and members of the public.

Five billion rand will go towards public service employees, who may fall outside the affordable housing bracket.

Of the remaining amount, R2 billion will go to affordable housing loans for households earning less than R20 000 a month; R2 billion will go towards members of the public who could qualify for bank loans; and R1.5 billion will be used to fund affordable housing developers, either in the form of debt or equity.

Current housing allowances provided to government employees will form part of this initiative.

Government presently only subsidises income earners of between R3 500 and R15 000, based on a sliding scale.

Of the 954 000 government employees who receive a housing subsidy, only 30% own a house, while the rest are renting.

SAHL confirmed that there is no subsidy component included in the investment it the funding it has received from the PIC. It has advanced this capital at a competitive funding cost and SAHL will in turn advance home loans at a rate that will seek to recover the funding costs.

While SAHL has a mortgage book of around R60 billion, excluding the PIC investment, it will also provide ‘non-mortgage’ home loans, which will be administered by way of a payroll deduction, granted to individuals who can’t secure title deeds on their properties since they live in rural or peri-urban areas.

This is clearly an innovative and ‘happy marriage’ of social and financial objectives,

and the PIC is confident it will also meet its own financial requirements – i.e. the public asset manager’s ‘top priority” is to ensure it gets ‘decent returns’ that are sustainable and will ensure that, when the requirements to fund pensions arise,

they have sufficient funding available.

This praiseworthy investment into SAHL forms part of the R70 billion that the GEPF has made available for developmental investments over the next five to ten years.

The demand for housing among GEPF members emerged during negotiations with organised labour, and this positive response by the PIC is highly commendable in these challenging times.

by Eve van Basten

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