Newly established transport nodes accelerate delivery of affordable housing

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"The provision of transport is crucial in shaping purchasing and renting decisions," says Manie Annandale, Head: Nedbank Corporate Property Finance's Affordable Housing Development Unit. "Affordable housing is driven by the availability of suitable land and as this cost increases, so too does the building of higher density developments that can best optimise these transport nodes."

He adds that with forecasts suggesting that 70% of South Africa's population will be urbanised by 2030, there is an increased focus on how best to accelerate the development of public transport infrastructure to reach other areas in major cities. One such example is the south of Johannesburg, which still has tracts of under-developed land that can be made available for affordable housing developments.

Rentals dominate the lower income market

Annandale says there has also been a notable trend towards the lower income bracket renting rather than buying affordable housing property in recent years. "When the Nedbank affordable housing book was established six years ago, these developments sold out pretty quickly. This has changed significantly over the last few years, with rentals now dominating and more than 60% of units being rented in developments that we are currently funding.

"The issue is that it can be difficult to prove affordability for many buyers. Often up to 30% of their disposable monthly income can be absorbed by transport costs, so to factor in rates and taxes, as well as a bond payment, means potential buyers may not qualify for financing."

Annandale says that he expects the delivery of affordable housing developments to accelerate going forward, as government continues to release public-owned land. According to recent announcements by Minister of Human Settlements, Lindiwe Sisulu, the aim is to build 50 mega projects - developments of between 2,000 and 4,000 new homes - over the next five years as part of government's social contract with the private sector across all spheres of business.

"One of the mechanisms through which this delivery will be accelerated is via public-private partnerships (PPPs) between government, developers and the banks. Government subsequently works closely with large developers to unlock tracts of land, with the bank providing the funding."

"There is an urgent need in South Africa to deliver more affordable housing to meet the socio-economic demands of the country and we are confident that with all stakeholders successfully working together in a collaborative manner, we will continue to meet this pressing requirement," concludes Annandale.