Swaziland has a growing housing finance sector. As the mortgage market does not yet meet the breadth of the population who might afford a mortgage, most households still finance their housing independently, with savings or non-mortgage credit.
The lowest recorded interest rate on a mortgage in Swaziland is eight percent, as of September 2016, and requires at least a 10 percent down payment. The cheapest newly built house by a developer recorded by CAHF is US$ 50 000, (which is for a 160 square metre unit). Cement prices are lower than the continental average, at US$ 6.00 for a 50-kilogram bag.
Demand for affordable housing remains strong, both for rental and purchase, as mortgages are only 11 percent of GDP. Housing microfinance will play an important role in increasing the supply of housing, and efforts to increase access should be undertaken. The largest mortgage lender is the Swaziland Building Society, with the four big banks making up the rest of the market. High levels of tenure security provide a strong basis for market growth, but supply is remains constrained, with only 614 new residential units approved in 2014. With a good macroeconomic environment, sound policy, better data and increased access to affordable credit, an enabled housing market can increasingly provide housing that the average household in Swaziland can afford.
Find out more information on the housing finance sector of Swaziland, including key stakeholders, important policies and housing affordability:
- Access to Finance
- Housing Affordability
- Housing Supply
- Property Markets
- Housing Policy and Regulations
- Housing Sector Opportunities
Each year, CAHF publishes its Housing Finance in Africa Yearbook. The profile above is from the 2018 edition, which has up-to-date profiles for 54 African countries.Download yearbook
The Kingdom of Swaziland is a landlocked country in Southern Africa with a population of 1.3 million inhabitants a GDP per capita of about US$3911 and a GNI per capita of US$ 3,230. Swaziland which has been classified as a lower-middle income, ranks 150 out of 188 countries in the Human Development Index. The population is fairly young with a median age of 20.5 years and people aged 14 years or younger constituting 37.4% of the country’s total population. The present population growth rate is 1.2% with average life expectancy of 49.64 years. An estimated 63% of the population live below the poverty line, and inequality is very high with a Gini coefficient of 0.51..
Due to severe drought and fiscal pressures, notably a decline in revenues from the Southern Africa Customs Union (SACU), economic growth slowed down to -0.6% in 2016 but is projected to grow by 1.4% in 2017. With government being the main driver of the economy’s aggregate demand and a major player in some sectors such as construction, any shocks in revenue would have a negative impact on growth prospects. In 2017 the average inflation rate was 6.9% while public debt and Foreign Direct Investments (FDI) stood at SZL67.9 billion (US$ 5216 million) and SZL11.2 billion (US$861 million) respectively.
The tertiary sector accounts for 51% of GDP contribution, followed by the industrial sector at 42% and the agricultural sector at 6%, whilst manufacturing (agro-processing of sugar, wood pulp, citrus fruit, pineapples, meat, clothing and textiles) as a sub-sector account for 36% (2014). State policy leans toward entrepreneurial development and encouraging self-employment exemplified within the Youth Enterprise Revolving Fund Initiative, targeting youth entrepreneurship at all levels within the school curriculum as a means encouraging industrialisation.
Access to Finance
The level of financial inclusion in Swaziland continues to improve with more than 65% of the adult population using some type of formal financial product compared to only 50% in 2011. This increase is primarily driven by greater usage of formal savings in banks/savings and credit cooperatives (SACCOs) and formal remittances. About 38% of adults save in formal financial institutions, 10.7% save through informal mechanisms, 17.9% save at home or with household members and 32.8% use no savings mechanism. Overall barriers include lack of understanding of formal financial products, proximity to and suspicion of financial institutions, high financial illiteracy, low financial eligibility and high turnaround times and flexibility around administrative procedures. Rural residents are twice as likely to be financially excluded (32%) as urban residents (16%). This may be more due to lower incomes of rural residents as opposed to physical barriers which only 3% of persons cite as their reason for being unbanked.
Swaziland’s banking sector consists of four commercial banks, three of which are subsidiaries of large South African banks, First National Bank, Nedbank and Standard Bank and one state-owned development bank – Swazi Bank. There is one building society – Swaziland Building Society (SBS) and three credit institutions – Letshego Financial Services, First Finance (Pty) Ltd and Blue Financial Services. The South African subsidiary banks control approximately 86% of the market. Together with Fincorp, a development finance corporation and the largest consumer lender in Swaziland, the banks have 44 branches, 204 Automated Teller Machines (ATMs) and approximately 1 313 Point of Sale (POS) terminals.
All the banks remain compliant and set prudential and regulatory requirements in terms of capital adequacy, liquidity and reserve ratios. Despite slow economic growth, the banking sector has continued to register positive growth. Total assets for the banking sector were valued at SZL20 billion (US$1.5 billion) in 2017 compared to SZL17.7 billion (US$1.4 billion) as of 31st May 2016 an increase of 5.7%. This improvement was fueled by positive growth in customer deposits which translated in growth in loans and advances. During the same period, it is noted that the quality of assets deteriorated from 6.8% to 5.7%.Total banking sector deposits increased from SZL12.6 billion (US$968.5 million) in 2016 to SZL14.4 billion (US$1.1 billion) as of 31 May 2017. Low economic growth is hampering the development of formal financial sector where banks are underserving the lower income market due to high risk.
SBS is the primary provider of mortgages, with the four big banks providing the balance. The SBS, established in 1962 is a viable, self-financing development and housing finance institution, and the major provider of long-term mortgage lending. It provides loans mainly for buying vacant land and housing construction but also for residential and commercial mortgages, and has more than SZL1.8 billion (US$138.3 million) in assets. Through a pioneering project, it also lends to residents of informal settlements by working with savings groups. The scheme involves providing loans to buy small plots and for house improvements. The scheme has less onerous income eligibility criteria than mortgages and provides a starter property for incremental building. Loans are partly guaranteed by the state. Loan uptake has been modest, however, due to among other reasons a reluctance to use plots as collateral among poorer households, reluctance to be taxed, general risk aversion by the SBS to lend more, and insufficient targeted marketing. The concept is, however, pioneering and offers a platform for greater lending, taking lessons learnt into consideration.
Swazi Bank provides general commercial banking services with a particular focus on business and development finance. The bank has historically obtained interest-free deposits from the government which has enabled it to serve lower income households by providing credit at lower than average market interest rates. Under the Civil Servants Housing Scheme, urban public servants can borrow up to SZL400 000, (US$30 746) while rural public servants can borrow up to SZL200 000 (US$15 372). A variety of other mortgage products are also available. Swazi Bank offers a rural housing loan, mortgaged either by a freehold property, or secured with the borrower’s pension withdrawal benefits. Commercial banks provide a few mortgages for the upper and middle income market.
The Swaziland National Housing Board (SNHB), apart from being a developer and owner of housing, also provides housing finance through the SBS as well as develops land for sale. Urban housing loans are offered generally at a Loan to Value (LTV) ratio of 80 to 90%. FNB requires a 40% deposit for a mortgage for a plot of land, while the SBS allows an 80% LTV ratio for the purchase of a plot, and a 95 % LTV ratio for the purchase of a house. The maximum loan term across all the lenders is 25 years, although Nedbank allows 20 years and FNB 30 years for house purchase. Bank Interest rates average 7.25% while deposit interest rates stand at 2.94% in 2017, between 2005 and 2017 the highest interest rate was 11.5% while the lowest was 5%. Commercial banks however charge interest rates as high as 15%. The SBS offers its mortgage at slightly below prime at 8%.
The vast majority of members of SASCCOs and the SBS also have accounts at banks, as such the products on offer fail to increase accessibility to financial services for new market entrants. SASCCOs was involved in the development of the Financial Inclusion Strategy which aims not only to expand financial inclusion, and promote economic development and poverty reduction. NGOs like Imbita and Ulote were established to address the lack of financial services offered to women and to provide training and consultancy services to entrepreneurs.
The capital market is small and relatively new having starting in 2010, comprising of a limited number of institutions, with low levels of activity in the primary and secondary markets. With only a few listed shares and government bonds with maturities from three, five and seven years the Swaziland Stock Exchange (SSX) is still struggling to build up sufficient market capitalisation.
In Swaziland a US$10,000 house loan costs US$77 per month and US$24,154 at an interest rate of 8% over 25 years. In addition the borrower is required to make a 10% deposit. This is affordable to 93.2% of the urban population. It costs about 1.7% of an average urban annual income to afford the cement at US$7 needed to build a 40m2 house. Rental prices range between US$100 and US$2000 but may be higher at the top end of the market while construction costs range between US$15,000 for the lowest cost house and US$2.2 million for the highest cost house. The price of the cheapest newly built house by a private developer is US$12, 718. Based on CAHF data (2017) at least 2441 or 0.63% of urban residents can afford a house costing less than US$40,000.
Since 2010, SNHB has had low-cost offerings priced at SZL280 000 (US$21 522) to SZL450 000 (US$34 589). This required a monthly income of SZL6 486 (US$498) to E10 422 (US$801) to qualify to service the loan. The SNHB’s Mbabane and Matsapha rental units range from SZL1 231 (US$80) to SZL4 291(US$277) while rental fees for two bedroom flats range from SZL1 327 (US$102) to SZL4 241 (US$326) per month This is beyond the reach of the vast majority in a country where more than 819,000 or 63% of the population is classified as earning less than US$2 a day.
Self-built housing is the principal type, with production of informal units predominant among the low income groups in urban centres. Households source funds from social support networks (family and friends), moneylenders and other finance sources such as business income and rental revenue. The total number of building plans approved, which is a good leading indicator on construction activity, depicted a positive trend rising by 5.5 percent from 728 units in 2013 to 768 units in 2014. Residential building plans approved increased significantly from 519 units in 2013 to 614 units in 2014, indicating potential within the sector.
The Swaziland Housing Board (SNHB) was established in 1988 to provide affordable housing and end-user finance, but current and future developments suggest that the SNHB primarily caters for middle to higher income earners. The SNHB has a residential portfolio in Mbabane (Swaziland’s capital city) and Matsapha comprising of 1085 units and further developed over 460 residential units, for locals working within the urban perimeters of Mbabane. It has three projects underway consisting of; 316 units in Mhobodleni Township, 437 units in Nhlangano Township (extension) ranging from 361 m2 to 1 150 m2 and 28 upmarket plots in Woodlands. The SNHB has plans for a further three projects: 1 000 hectares for upper and middle income development in Woodlands (phase 2); a mixed development of 330 plots in Ngwenya New Township; and a middle income township in Pigg’s Peak. SNHB acts as an agent for the sale of government properties with three sales portfolios: Woodlands, Nkhanini and Thembelisha. The Thembelisha Estate has plot sizes ranging from 1 416m² to 2 631m² which are best suited for exclusive upmarket residential purposes. The Nkhanini development has 440 fully served plots ideal for both residential and commercial development, the plot sizes range from 346m2 to 1 410m².
The property market in Swaziland continues to show growth and opportunity for potential home buyers. Top end property prices are however overly inflated, making them unsustainable and unaffordable to the majority of people. This results in the inability to sell available stock at the initial asking price. It is often not the agent or the seller who determines the value of a property. This is influenced by the current market conditions and what buyers are prepared to pay for property in that market. Another element that will have an influence over the market is the fact that more and more new developments have been built. The perceived oversupply is mainly at the top and middle ends of the market where demand is low compared to that of affordable housing units. The drop in demand for standard residential plots and housing may however result in reduction of prices as most units remain unoccupied and sellers are forced to cut prices or come up with initiatives such as rent-to-own. Thus providing an optimal supply commensurate with available incomes is critical to attracting additional foreign investment in the housing sector.
The high municipal rates levied in the urban areas of Swaziland have contributed to the trend of more and more people moving out of the cities and building property on Swazi nation land. The problem with this trend is that the land does not hold a title deed, which means that homeowners are unable to use their property as collateral to access bank loans or mortgages from financial intuitions, says Hutton.
Housing Policy and Regulations
Affordable housing delivery is affected by policies, legal and regulatory instruments such as the draft National Land Policy, draft Peri–urban Growth Policy, the 1961 Town Planning Act, Building and Housing Act of 1968 and Local Government Act of 1969. The Town Planning Act allows for the production of modern town planning schemes like the Ngwenya New Township and Thembelisha Estate while the Building Societies Act (1968) helps to regulate the mortgage market. The enactment of the Consumer Credit Act will improve credit extension as more credit institutions adopt the regulations, while better credit risk management will stabilize the consumer credit market. The high levels of tenure security enable financial institutions to easily provide housing microfinance which plays a significant role in the Swazi economy. Clearly there is need to review the Town Planning and Building and Housing Acts and to enact new legislation around rental housing to address the deficiencies in the Housing Policy of 2001. Furthermore, the Residential Tenancies Bill has to be enacted into law to improve the relationships between landlords and tenants. In the long term housing production is likely to be affected by policies and laws that remain in draft form and are outdated going back almost 40 years.
A 2013 World Bank study comparing access to bank finance pre- and post-collateral reforms in seven countries found that a collateral reform increases access to loans by seven percent, reduces interest rates by an average of three percent and extends loan maturities by six months However, Swaziland is not able to take advantage of the opportunities to lower costs, increase access to credit, and reduce risks, because the framework governing securing movable property as collateral is non-existent. This means that while banks can take movable property as collateral, there is very little value from securing this property as there are practically no way to register the collateral and enforce against the collateral.
Housing Sector Opportunities
The Central Bank of Swaziland has continued to maintain comparatively lower interest rates which enable the local banks’ to maintain prime lending rates at competitively lower rates and provide cheaper credit for their customers thus stimulating borrowing that can translate to growth of the economy.
The business climate in Swaziland has been improving albeit slowly, which translates into modest FDI inflows and growth in investments. Government has introduced a number of reforms to improve ease of doing business in the country. In 2017 Swaziland ranked 111th out of 190 countries in ease of Doing Business Report compared to 108th in 2016. Swaziland stands at 117th out of 190 on ease of registering a property which requires 9.0 procedures takes 21 days and cost 7.1 percent of the property value while the score on quality of land administration index is 14.0.
The Investor Roadmap unit (established in August 2014) is implementing the comprehensive reform action plan (which was crafted in April 2012) that seeks to create a conducive business environment not only for foreign investors but also for local small medium enterprises (SMEs) for all sectors. Notwithstanding the country is still ranked poorly in enforcement of contracts, trading across borders, getting electricity and starting a business. With the introduction of appropriate reforms, a review of the policy, legal and regulatory framework, Swaziland is likely to attract new investments and FDI that will grow the economy.