WINDHOEK – South Africa has taken the bold step to subsidise houses for people who find themselves above the economic threshold but who nevertheless do not qualify for bank loans to enable them to benefit from low-cost state housing.

South Africa’ subsidy introduction comes months after Namibia debated a host of suggestions to improve housing affordability in the country.  

South Africa’s newly introduced subsidy through a N$1 billion fund goes to people earning between N$5 000 and N$15 000, and

would be channelled through provincial governments to make it easier for banks to approve their loan applications.
South Africa’s president Jacob Zuma announced the subsidy last week during his national address.

Namibia’s suggestions, yet to be followed up with concrete actions, include allowing employed people to access part of their pension funds to build themselves houses.

This would allow people to use the house as an asset with value and access other financial services – be it setting it up as collateral for their first mortgage for an additional house or to use the funds to start a business.

South Africa’s housing subsidy fund would become operational in April and be managed by the National Housing Finance Corporation (NHFC), which is almost similar to Namibia’s National Housing Enterprise (NHE).

Unlike NHE, however, NHFC’s mandate is more on providing financing solutions for low to middle income people and not on development of the properties.

Namibia is faced with the problem of affordable housing. Figures collated in late 2011 show that house price inflation exceeded national income growth for 23 months in a row.

Local analysts and economists have found that the increase in house prices is a result of town councila not being able to avail sufficient serviceable land to Namibians in need of housing.

As a result, prices for available erven and developed houses shot through the roof, reaching levels of non-affordability for young professionals in search of their first home.

House prices are said to be 30 percent above building costs, and the size of houses has decreased significantly.

The situation is made worse by the presence of property speculators who want a share of the fortunes to be gained from the market.

Last week International Monetary Fund (IMF) executive directors, after completing assessment of Namibia’s economic health going forward, asked authorities to monitor how much money commercial banks are loaning to homebuyers at a time when Namibian house prices appear to be highly inflated.

The fear is that under present market conditions, excessive lending without tighter regulatory scrutiny poses serious risks to the country’s financial system when prices for residential properties do finally come down.

The authorities – Treasury and Bank of Namibia – have also been advised to adopt preventative measures that would contain any problems that may arise when the bubble does pop.

IMF’s executive directors praised the resilience of the country’s financial sector but asked government to be vigilant, saying “it will be important to closely monitor banks’ exposure to the domestic housing sector and take pre-emptive measures to contain risks from a reversal of the surge in house prices”.