Major investments into the affordable housing sector, coupled with the rapid growth of the black middle class and the continued historic rise in black homeownership, is set to see unprecedented levels of African families own their own homes in 2014.
Last year was the first year in which white buyers made up less than 50% of home buyers in South Africa* and this figure is expected to rise substantially this year, as more moderately priced housing stock comes onto the market.
International Housing Solutions, the global private equity investor leading investment into the affordable housing sector in sub-Saharan Africa, recently launched a new multi-million dollar fund on the back of the success of its first fund, to invest in the development of homes for the emerging middle class. IHS’s second fund plans to surpass the number of units – 28 000 – funded via its first fund.
Soula Proxenos, Managing Partner at IHS, says the “meteoric” growth of the country’s black middle class as well as urbanisation, has created a situation where demand vastly outstrips supply in the housing market. While this dynamic has been in play in the past, the net deficit in housing for this sector is growing, she says.
“According to a recent study by the University of Cape Town’s Unilever Institute of Strategic Marketing, SA’s black middle class has a combined spending power of more than R400 billion a year. Many of the individuals from this group want to take the step from becoming renters of property to become owners, however they are hampered by the lack of entry level houses on the market. In addition, many individuals and families are desperately looking for safe and convenient rental housing.
“As investors in the affordable housing sector, we will launch several projects in SA and sub-Saharan Africa in coming years to ensure a significant number of homes come onto the market to respond to this demand,” says Proxenos.
She adds that IHS envisions the unprecedented growth in black home ownership to rise to even higher levels in 2014.
“For investors, this growth in the market provides a substantial opportunity, as has been shown with the success of IHS’s first fund, the SA Workforce Housing Fund,” she says.
The US$230m SAWHF provided financing for more than 28 000 homes with a combined total value of more than R8.6 billion.
Its successor, IHS Fund II, is set to dramatically build on this foundation, with more than half a billion rand already committed by institutional investors at the launch of the fund, including by IFC, a member of the World Bank, and the National Housing Finance Corporation.
“Although the affordable housing sector is a relatively untraditional asset class, its continued expansion as a result of the unmet high demand for homes in SA and sub-Saharan Africa has made it a particularly attractive and promising opportunity for investors,” says Proxenos.
“And as the sector matures, proving its mettle in terms of solid track records, transparency and returns, we expect more institutional investors and asset managers to start seeing the value of committing funds to this sector in order to realise superior returns while at the same time making a real difference to African economies, societies and the lives of individuals.”
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