Housing Finance in South Africa

Overview

South Africa’s government has been working hard in leading the effort to contain the spread of the Covid-19 virus.  CAHF is grateful to the hardworking essential sector workers, for their tireless efforts to increase the breadth of testing across our communities, to ensure that residents have access to essential services, and that our country and its residents are safe.  For up to date information on their efforts, visit the Online Resources & News Portal.

This profile is also available in French here.

To download a pdf version of the full 2020 South Africa country profile, click here.

With the second largest economy in Africa and a population of 58.5 million, South Africa has been hit hard by COVID-19, having been struggling with low growth and high unemployment even prior to the pandemic. The pressures of COVID-19 have exacerbated conflict around affordable housing, with key housing-related government responses to COVID-19 focusing on the housing backlog and informal settlements.

Although South Africa benefits from a robust banking sector and access to credit is generally available to low income earners, the lockdown created financial hardship, which saw a slowdown in demand for home loans. However in July 2020 there was a further cut in the repo rate leading to a reduction in the prime lending rate to seven percent—the lowest in over two decades. The significant reduction in the prime lending rate also creates an opportunity for first-time buyers to access the lower end of the housing market, with more affordable home loans and lower monthly repayments. Poor creditworthiness and high debt of households remains a critical issue.

Housing affordability remains a key challenge especially for the lower income working class.  The price of the cheapest, newly-built two-bedroom house built on a minimum size plot of 40m2 in the City of Johannesburg is R539 830 (US$ 31 320). A key pressure on affordability is the insufficiency of supply, especially in the affordable segment.

Through the national government’s housing programme, a fully-subsidised 40m2 house is available to households earning less than R3 500 (US$203.07) a month who meet certain qualification criteria, and rental housing in inner city developments is available through government’s social housing programme. Government’s housing programme has had a tremendous impact on housing supply, with nearly 14 percent of households lived in state-subsidised housing. Since 1994, the government has delivered over 4.7 million housing opportunities.

Looking forward, the prospects for growing demand in the lower end of the affordable housing market are potentially strong in the face of the COVID-19 pandemic, as shrinking incomes necessitate cheaper housing options for households. The reduction in the mortgage prime lending rate (to the current seven percent) is attractive to buyers who can more easily qualify for a home loan at reduced interest rates, thereby extending the market reach within the affordable housing sector. The reduced prime rate also provides opportunities for investors to build offerings in this sector with lower development costs, financed with a lower cost of capital. And the asset base of government-subsidised houses on the national deeds registry provides a particularly important opportunity in the context of declining new build that warrants attention by both the public and private sectors.

Find out more information on the housing finance sector of South Africa, including key stakeholders, important policies and housing affordability:


Each year, CAHF publishes its Housing Finance in Africa Yearbook. The profile above is from the 2020 edition, which has up-to-date profiles for 55 African countries.

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