The affordable sector is the lynchpin of the residential property market in the aftermath of the recession and this is unlikely to change in the near- to medium-term.

It is in this vein that First National Bank (FNB) has set a target of financing 100,000 homes in the affordable sector by 2012.

FNB has financed more than 76,000 affordable housing units since the establishment of its affordable housing finance business unit in 2002. The bank aims to finance more than 10,000 housing units by end June 2011 and an additional 15,000 by end June 2012.

Despite the economic downturn and a tough recession, FNB Housing Finance managed to grow its profit from end user finance in this market by 84% in the 2009/2010 financial year.

“The bottom line is that we focused on the quality of the loans granted than on the quantity. This enabled us to endure the hardships of the recession and limit our defaults within acceptable levels,” says Marius Marais, CEO of FNB Housing Finance.

Despite huge demand for housing in South Africa there is still an undersupply in the affordable housing market space (currently defined as houses in the R180k to R500k price range).

FNB Housing Finance has been working with government and other stakeholders to come up with solutions to address the housing backlog and increase housing delivery.

“We support government’s drive of developing an integrated human settlement. To us it is more than providing end-user finance to our customers, it is also about enabling and creating sustainable communities through the provision of quality affordable housing and to achieve this it is crucial for all stakeholders to work closely together and share best practises for the benefit of our country,” says Marais.

“As we move out of a recession, and stability returns to the property market, we see tremendous opportunities,” adds Marais.

“The rapid growth of our cities, and the increasing demand for affordable shelter, means an ongoing demand for affordable housing. We intend to hold onto our position as a major player in that space, and to ensure responsible consumers have access to the best possible housing finance solution,” he concludes.

Price growth in the affordable category has also proven that there is great scope for finance and supply in this market, although the growth in this category has also fallen victim to the decelerating trend. According to Absa’s House Price Index for August the value of small houses (80-140sqm) increased by a nominal 28,3% y/y in August, slightly down from a revised 28,7% y/y in July. In real terms, the value of a small house was up by 24,1% y/y in July, after rising by 23% y/y in June.

This is still far above the average nominal value of small, medium and large houses, which increased by a weighted 7,1% in August, down from a revised growth rate of 9,4% y/y in July.

Jacques du Toit, property strategist at Absa, told Property24 that affordability has remained one of the key factors in the property market, even with interest rates at their lowest level in three decades, and it has all to do with the financial position of the consumer.

“The household sector is still struggling with high levels of debt, with data released by the National Credit Regulator for the first quarter (Q1) of the year showing that many consumers are still battling with debt. Some further job losses in the first half of the year did not really help consumers to recover financially while consumer confidence has increased in early 2010, but has since remained unchanged up to the third quarter (3Q) this year. Some relatively strong house price growth in the 1st half of the year, together with rising property rates and taxes, continued to keep the focus on affordability.

“We are of the opinion that affordability will remain an important issue in the housing market in future.”

He says demand for more affordable properties in each segment will be noticeable, with resultant influences on price trends.

Pam Golding Properties’ MD for the Western Cape metro region, Laurie Wener, says amid tough economic times and ongoing difficulty in obtaining mortgage finance, the importance of affordability in the housing market remains paramount. “Accessible pricing remains a major obstacle to many new entrants to the housing market, and is a crucial factor for many other types of buyers, including those downscaling for retirement or wishing to upgrade to meet the needs of a growing family.” – Eugene Brink

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The Consumer Protection Act (CPA), due to take effect on 25 October this year, will mainly force agents to ensure property sellers and buyers understand the wording and legal effect of all contracts they enter into.

If this is not complied with, the Act gives wide latitude to the consumer to seek legal recourse and compensation.

Simon Raab, Southern Suburbs manager for Greeff Properties, says property marketers will find themselves “in a new ballpark” when this Act is implemented.

Raab warned that agents will have to take it upon themselves to ensure that sellers and, more particularly, buyers, have fully understood the meaning of the wording and legal effect of such wording contained within all mandate agreements and contracts into which they have entered. “The aim of the new Act is to promote a fairer, more accessible and more sustainable marketplace in which the less well-informed and less educated clients are better protected.”

Furthermore, said Raab, if in any way the quality of the product or the service rendered falls short of generally accepted high standards, the customer will from November onwards, be entitled to claims, replacements or even to a total cancellation of the agreement. “Consumers will also have an opportunity to approach the National Consumer Commission instead of the Magistrate’s or High Courts, which in itself will encourage more action being taken when damages can be proven.

“The wording of the Act makes it clear that all in the ‘supply chain’ can be held responsible. This, as I read it, implicates the agent as well as the manufacturer or, in the property world, the seller and/or valuer.”

Steven Kay, MD of Home Inspection Services, says Section 55 of this Act places a responsibility on estate agents to ensure that potential buyers are fully informed regarding the condition of the property.

“The ‘As Is’ or ‘voetstoots’ clause in an Offer to Purchase will no longer protect estate agents from the perils of non-disclosure. This means that the challenge for estate agents is to provide full disclosure up-front to potential buyers.”

Dr Andrew Golding, CE of Pam Golding Properties (PGP), says he believes the primary benefit of the Act will be enhanced protection for consumers against exploitation and unfair marketing and business practices. “Property buyers will also benefit from improved standards of consumer information and the setting of standards and national norms relating to consumer protection.

“I do believe that the Act is a good thing that will offer improved protection to the most vulnerable of consumers, who most often find themselves in unequal bargaining positions. Consumer issues will also be dealt with in a less fragmented way and the Act has sought to consolidate various pieces of legislation in relation to consumer protection. The regulations to be promulgated under the Act will provide greater clarity with respect to the implementation of certain of the Act’s provisions.”

He says PGP has already commissioned a review of their standard documentation and business and marketing practices to ensure that changes are made where necessary and new processes implemented as required. “We believe that this review will be an ongoing process in light of the interpretation by our courts of the new Act’s provisions.”

The CPA is set to have a massive impact on virtually every business in the country, including the real estate industry, says Peter Gilmour, chairman of RE/MAX of Southern Africa.

He says that, for example, the CPA states that a supplier cannot make any false, misleading or perceptive representations that any land or immovable property has characteristics, facilities and amenities that it does not have, or that it may lawfully be used for purposes that are unlawful or impracticable. “As per this particular clause, any false representation or inaccurate concepts, whether delivered knowingly or not, could, under the CPA, make it possible for the buyer, on appeal of the courts, to get the contract cancelled.”

Furthermore, it deals with restrictions pertaining to unfair, unjust or unreasonable terms, and stipulates that the price and terms must be fair. “This is a relatively controversial provision, as it could be used as a price control mechanism. In reality, with markets and demand in a constant state of flux, it is very difficult to determine what a fair price is. A fair price is what the market at any particular given time is willing to pay for a property,” he explains.

Gilmour notes that in terms of Section 55 of the CPA, every consumer has a right to receive goods that are suitable for the purpose for which they are bought and free of defects. He explains that the exception to the aforesaid is if a consumer has been expressly informed that the goods were offered in a specific condition and has accepted goods in that condition. “However, this particular section does not apply to auctions.”

The CPA is limited to transactions that are concluded as part of the regular business of sellers, suppliers, distributors and manufacturers. “As long as it is not their usual business, the Act does not apply to once-off transactions undertaken by private individuals who sell their property. However, pertaining to the real estate industry, if the supplier of the home is a developer or builder, and defects become evident after the sale, they will be held responsible.

Gilmour says the seller will need to sign a declaration that they have listed everything that they are aware of, and likewise, the buyer will also need to sign a declaration noting that they have read and fully understood the list.

“If enforced successfully, the CPA will no doubt instil great confidence in local and international investors alike, as well as weed out unscrupulous operators, which will be to our benefit in the long run.”

Raab says ultimately, this legislation will work to the benefit of all concerned because it will result in more transparent, open dealings coupled to strong deterrents against any form of misrepresentation.

Raab added that the Act does not in any way do away with the basic stipulation that all property deals have to be in writing, “but it will make it necessary to ensure that the wording of these deals is clearer and simpler than in the past”. Greeff Properties, he said, would be consulting with their lawyers on this matter. Source: Property24

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