South Africa’s economy is the second largest in Africa, with a gross domestic product of R4.84trillion (US$343.24 billion) in 2018. Among the population of 57.77 million, high levels of inequality and poverty endure. South Africa has a robust banking sector, with a banking association of 33 members including local and foreign-owned banks. While all income earners generally have ready access to credit, credit usage is uneven, and indebtedness is high. The average mortgage loan size for mortgages newly extended in 2018 was R198816 (US$14 072). From 1 April 2018 to 31 March 2019, a total of 157 159 mortgages were extended, 97 percent of which were to higher income earners. While all income earners generally have ready access to credit, credit usage is uneven, and indebtedness is high.
The total outstanding gross debtors’ book of consumer credit was R1.88 trillion (US$133.06 billion) as at Q1 2019, while mortgages accounted for 50.44 percent of this. The average mortgage loan size for mortgages newly extended in 2018 was R198 816 (US$14 072). From 1 April 2018 to 31 March 2019, a total of 157 159 mortgages were extended, 97 percent of which were to higher income earners. Microfinance continues to be an area of growth. Bank and non-bank options are available for microfinance. Microfinance credit is provided by lenders for housing improvements and is also extended to low income earners who have secure rights over their housing but are excluded from other formalized finance sources.
Although the inflation rate as measured by the consumer price index (CPI) dropped to 4.7 percent by the end of 2017, constraints on consumers’ ability to afford housing persist partly due to the impact of the high price of food and clothing. Affordable housing provision through various schemes such as instalment sales has become more difficult to achieve due to rising project development costs, the lack of and high cost of suitable and well-located land, especially in cities, and the low income levels of potential owners.
To provide a supply-side delivery vehicle, the government has several subsidized housing programmes for low income households. This includes the Finance Linked Individual Subsidy Programme (FLISP) which aims to help households who earn between R3 501 (US$248) to a maximum of R22 000 a month to buy a home. The Government Employees Housing Scheme (GEHS) is also available to civil servants and takes the form of a housing allowance. The high number of households living in informal dwellings and/or informal settlements is largely due to the growth in household numbers combined with population relocation to urban areas, exerting additional pressure on limited housing supply. The housing backlog in South Africa stands at approximately 2.3 million in 2019.
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