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RE/MAX enters the bonded affordable housing market

The bonded affordable housing space (homes priced from R300 000 – R650 000) is set to grow considerably over the next few years - both in terms of buyer demand and investment potential, says Adrian Goslett, CEO of RE/MAX of Southern Africa, who is pleased to announce that RE/MAX will now be adding this sector of the market to their offering.
 
He points out that currently more than 50% of the registered properties at the deeds office are valued at less than R500 000, and these kinds of properties can offer investors impressive yields. “However, it is the fact that homes will be more accessible financially to those who need them that will have the most impact on the market,” he says.
 
“South Africans have a deep seated desire to own their own property,” says Goslett, who notes that now that the rules around government subsidies through the Finance Linked Individual Subsidy Programme (FLISP) have changed, more South Africans will be able to make their dream of home ownership a reality.
 
Goslett explains that initially, buyers who were looking at homes priced at R300 000 and less qualified for a FLISP assistance, however, the programme has now changed to assist any first time homebuyers with a grant, provided they are South African citizens and earn between R3 500 and R15 000 per month. “This programme assists qualifying buyers to reduce the initial home loan amount or fill in the shortfall between their loan and the actual house price,” he says. “This opens up so many more doors for buyers in the bonded affordable housing space as these are the buyers who typically find it challenging to qualify for home loan finance as their salaries are too low to qualify for a bond, yet too high to qualify for free government housing.”
 
It is interesting to note that buyers within the bonded affordable housing market are mostly single women (more than 60%) with children who they are supporting. “These buyers are also mainly teachers, nurses, police or other government employees.”
 
Location is just as important for them as for any other buyers, with proximity to hospitals, transport nodes, retail facilities and schools rated as the most significant. “Safety for their families, especially their children is also very important to these buyers. This is why closed estates that have security features such as a guard house and a secure perimeter with electric fencing are sought after.”
 
There are however distinctive trends in this market in terms of buyer profiles which are interesting to note, says Goslett. “In general, the emerging market will follow typical home ownership patterns and stay in their affordable home for five to seven years before upgrading or moving. The older generation buyers have, on the other hand, been saving up for years for a deposit in order to be able to purchase a home, and their home will be an ‘inheritance home’ that will be passed down to future generations. There is a story about a domestic worker who saved for 10 years and finally had raised R130 000 towards her home. South Africans generally have a bad savings culture, so this really demonstrates how strong the desire for home ownership is – very few people earning the R5 000 a month that she earns would be able to save up so much in 10 years.”
 
An interesting trend on the investment side of bonded affordable housing is that young graduate investors are placing a priority on homeownership and are entering the market in their first or second year of work. “These investors still live at home with their parents – and they don’t want to move just yet. However they see the opportunities that getting into the property market early can bring them,” says Goslett. “They are ideal bond-ready candidates as they haven’t had the time to accumulate much debt. They rent out their affordable homes and receive excellent yields as the rental amount pretty much pays off the bond for them.”
 
Goslett notes that in the bonded affordable space, a home that costs R349 000 to purchase, for example, can be rented out for around R3 800 per month, compared to a R700 000 home that could only be rented out for around R6 000 per month. “Most of these homes have pre-paid electricity metres, and the only additional cost might be a fee of around R200 per month for a home owners levy.”
 
In closing Goslett notes that demand for bonded affordable housing is being driven by urbanisation and says he expects the pent up demand for quality homes within the lower price ranges to continue well into the future. “There is definitely a housing backlog in South Africa, particularly in the major cities, where demand is exceeding supply. RE/MAX looks forward to being part of the country’s housing solution, and making home ownership dreams come true.”


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