From a real estate perspective, the big news coming out of last week’s Medium-Term Budget Policy Statement (MTBPS) was that R1bn of the R50bn worth of government expenditure that is being reprioritized over the next three years will be directed to housing subsidies that assist more low and medium-income households to access affordable home loans and become home owners.
So says Rudi Botha, CEO of BetterBond*, SA’s biggest bond originator, who notes: “Finance Minister Tito Mboweni did not elaborate but we assume that he was referring to boosting the number of subsidies available under the Finance-Linked Individual Subsidy Programme (FLISP) introduced some years ago by the Department of Human Settlements (DHS).”
FLISP** is intended to assist those earning more than R3500 a month but less than R15 000 a month (the “gap” market) to qualify for home loans and buy their own pre-owned or newly-built homes – and it is the only government housing programme that immediately brings low and medium-income earners into the formal or “bonded” housing sector, he says.
“Consequently, the move to centralise an additional R1bn worth of funding and make it available to those applying for FLISP subsidies is likely to have quite a significant effect on the real estate market over the next three years.”
FLISP subsidies are available on a sliding scale depending on household earnings, with the maximum amount available (to households earning between R3500 and R3600 month) being R87 000. These funds can be used to either directly reduce the size of the bond required to purchase the property in the form of a deposit or bridge a shortfall between the loan amount and the property price.
According to the DHS medium-term expenditure notes, some 23 300 FLISP subsidies have been granted to date, and a further 18 700 were expected to be granted in this financial year before the additional R1bn allocation in the MTBPS.
And now, says Botha, even if every household that applies for a FLISP subsidy were to receive the maximum grant of R87 000, the extra R1bn has the potential to enable at least 12 000 additional families in the gap market to access home loans and acquire their own homes over the next three years.
“We are thus delighted with this move and would urge all those seeking home loan pre-qualification prior to launching a FLISP subsidy application to do so through a reputable bond originator like BetterBond. We are familiar with the different qualification requirements and are able to simplify and streamline the whole application process to make things much easier for prospective buyers.
“We will also ensure that applicants obtain the lowest interest rate possible, which can make all the difference between being able to afford a home of your own or not.
“We annually assist more than 33 000 first-time buyers to apply for home loans and are currently finding a variance of at least 0,5% between the best and worst rates being offered on the average bond approval. And on a R500 000 loan, for example, the lower interest rate would translate into a saving of about R200 a month on the home loan instalment – and a total interest saving of almost R42 000 over the life of a 20-year bond.”