This week’s theme for Eighty20‘s Fact a Day has been housing finance in SA. Drawing on data from the 2010 General Household Survey and the National Credit Regulator’s Consumer Credit Market report, they wrote on Monday: “there are 14.3 million households in SA. As at end March 2011 there were 1.8 million mortgage accounts, amounting to R770 billion (64% of all consumer credit).”
I’m interested in what is inside those numbers: who are the 1.8 million mortgage account holders, and where do they sit on our income pyramid? Last week, property24.com reported that both Absa and FNB are planning to retrench staff in their home loan divisions because the market has fallen dramatically in the past few years. The same article quotes Standard Bank’s home loans director as saying that the home loan market had plunged in value from about R350 billion in 2006/07 to just R120 billion last year. FNB’s monthly volume of home loan applications has fallen to 10 000 a month now, from between 30 000 and 35 000 a month in 2006/07. Are these declines across the board, in all segments of the housing market? Or just in a particular segment of the market.
A fascinating graph developed also by Eighty20 a few years ago, with data from the 2005/06 Income and Expenditure Survey, and from the National Home Builder’s Registration Council, showed new housing delivery figures relative to market segment. At the bottom end, data suggested that we were building about 1 new house for every 40 households in the subsidised market of households earning less than R3500 per month. At the top end, we were building about 1 new house per 10 households earning about R30 000 per month. In the middle, for households earning between R12 000 – R30 000 per month, we were building about 1 new house for every 30 households (this was at the height of the Financial Sector Charter). The terrifying gap was in the bottom middle: households earning R3500 – R12 000, where we were building about 1 new house for every 420 households.
The graph raises a number of issues for me. First, is it possible that we have reached a saturation point at the top end of the market, and can we use this, in part, as an explanation for the declines the banks are reporting upon? Second, while the majority of delivery is happening at the bottom end, it is still insufficient. Our subsidy programme is not reaching the levels of scale required: a new approach must be sought. And third, for whomever cracks the middle market – whether the bottom or the top middle – there is enormous opportunity! Isn’t this where we should all be looking?