HOUSING FINANCING -A PUBLIC-PRIVATE PARTNERSHIP – “ PRIVATE HOUSING FINANCE IN AFRICA” BY: ASARE AKUFFO MANAGING DIRECTOR HFC BANK (GHANA) LIMITED ACCRA, GHANA 8 th SEPTEMBER Annual Conference and General Meeting of African Union for Housing Finance 1 Joaquim Chissano International Center 8 th to 10 th of September 2009, Maputo - Mozambique
OUTLINE OF PRESENTATION 1. General Introduction 5. Country Examples a) Ghana a) Africa Growth Performance b) Africa’s Inflationary Situation b) Nigeria c) Global Development Housing Market c) South Africa d) Trends in the Housing Market of Africa d) Kenya 2. Housing Finance in Africa a) Mortgage Penetration by Regions 6. The Way Forward b) Depth of Housing Finance c) Housing Affordability Situation d) Major constraints across Africa 7. Conclusion 3. Recent Developments in Housing Microfinance 4. Challenges Facing Microfinance lenders Annual Conference and General Meeting of African Union for Housing Finance 2 Joaquim Chissano International Center 8 th to 10 th of September 2009, Maputo - Mozambique
GENERAL INTRODUCTION Annual Conference and General Meeting of African Union for Housing Finance 3 Joaquim Chissano International Center 8 th to 10 th of September 2009, Maputo - Mozambique
AFRICA GROWTH PERFORMANCE (Real GDP Growth) 2003 2004 2005 2006 2007 2008 Sub Saharan Africa 5.0% 7.0% 6.2% 6.3% 6.7% 5.9% Oil Exporting Countries 8.1% 11.2% 7.8% 7.5% 8.9% 8.1% Over the past decade sub-Saharan Africa has made remarkable gains in promoting • growth and achieving economic stability. Growth — which is essential for much-needed poverty reduction — averaged more than 6 • percent over the past five years; inflation had fallen to single-digit levels before the fuel and food price shocks of 2008; • and reserves were built up. These positive developments stemmed from: -strong macroeconomic stability -a favorable external environment, especially rising commodity prices; Debt Relief and aid from the international community. ( Oil exporting countries include; Angola, Cameroon, Chad, Congo, Equatorial Guinea, Gabon, Nigeria) Source; IMF REGIONAL ECONOMIC OUTLOOK 2009 Annual Conference and General Meeting of African Union for Housing Finance 4 Joaquim Chissano International Center 8 th to 10 th of September 2009, Maputo - Mozambique
INFLATIONARY SITUATION AFRICA Consumer Prices 2003 2004 2005 2006 2007 2008 Sub Saharan Africa 10.8% 7.3% 8.8% 7.3% 7.1% 11.7% Oil Exporting Countries 20.4% 14.9% 14.7% 8.2% 5.7% 9.9% Consumer Prices averaged 8.23 percent for SSA over the past six years , whilst that of Oil Exporting countries was 12.3 percent during the same period.(Oil exporting countries includes; Angola, Cameroon, Chad, Congo, Equatorial Guinea, Gabon, Nigeria) Source; IMF REGIONAL ECONOMIC OUTLOOK 2009 Annual Conference and General Meeting of African Union for Housing Finance 5 Joaquim Chissano International Center 8 th to 10 th of September 2009, Maputo - Mozambique
GLOBAL DEVELOPMENTS IN HOUSING MARKET • Global demand for housing is expected to increase about 2.5 percent per annum through 2011, generating construction of an estimated 60 million new housing units. • The fastest gains will be in the Africa/Mideast region, spurred by the most rapid increases in population and household formation. Annual Conference and General Meeting of African Union for Housing Finance 6 Joaquim Chissano International Center 8 th to 10 th of September 2009, Maputo - Mozambique
TRENDS IN THE HOUSING MARKET OF AFRICA-1 70% of housing stock in Sub-Sahara Africa is of poor quality and • not in compliance with local regulations (Killick). In Africa over 75% of households cannot access mortgages despite • the increasing trend in the mortgage GDP ratio. Internal population flows presents a challenge to the ability of • government planning agencies to respond to the need for urban housing. The housing finance industry in Africa is dominated by state or • government institutions and a few players from the private sector. Annual Conference and General Meeting of African Union for Housing Finance 7 Joaquim Chissano International Center 8 th to 10 th of September 2009, Maputo - Mozambique
TRENDS IN THE HOUSING MARKET OF AFRICA-2 • Informal settlements are home to majority of inhabitants in most African cities. • Over 70perent of urban population suffers shelter deprivation in terms of inadequate housing, water supply, or sanitation. • There is overcrowding and upsurge of slums in most African countries.( Kenya, Namibia ,Zambia) Annual Conference and General Meeting of African Union for Housing Finance 8 Joaquim Chissano International Center 8 th to 10 th of September 2009, Maputo - Mozambique
MORTGAGE PENETRATION BY REGIONS Compared to the developed regions of the World, Africa has a • relatively meagre aggregate MD/GDP ratio(2001-2005). 5-yr-Average MD/GDP Ratio REGION Africa 13.5 Eastern Europe 2.7 Emerging Asia 12.5 Latin America 5.5 Middle East 4.9 North America 65.8 Pacific 38.7 Europe 43.6 Source: Warnock, V.C., Warnock, F.E., Markets and Housing Finance, J. Housing Econ. (2008), doi:10.1016/j.jhe.2008.03.001 Annual Conference and General Meeting of African Union for Housing Finance 9 Joaquim Chissano International Center 8 th to 10 th of September 2009, Maputo - Mozambique
DEPTH OF HOUSING FINANCE Length of Contract Fixed of Legal (years) MAX LTV(%) variable MD/GDP (Avg) Rights Emerging Markets n/a n/a n/a 8.6 n/a Africa n/a n/a n/a 13.5 n/a Ghana 20-25 80 Variable 0.5 5 Algeria 20 90 Fixed 1.3 3 Morocco Max-25 70-100 n/a 7 3 South Africa 20-Oct n/a Variable 22 5.5 Tunisia n/a n/a n/a 6 3 NB: For the Legal rights score index the higher scores indicates that collateral and bankruptcy laws are better designed. - Source: Warnock, V.C., Warnock, F.E., Markets and housing finance, J. Housing Econ. (2008), doi:10.1016/j.jhe.2008.03.001 Annual Conference and General Meeting of African Union for Housing Finance 10 Joaquim Chissano International Center 8 th to 10 th of September 2009, Maputo - Mozambique
HOUSING AFFORDABILITY SITUATION IN SELECTED AFRICAN COUNTRIES-1 Uganda Only 0.68% of households have access to mortgage loans from commercial banks. • 19.52% of households have access to housing microfinance loans from MDIs. • 62.3% have no access to housing loans. • South Africa (Rust, 2007) Within SA’s population of about 12.7 million households, only about 2 million can afford • to meet their needs in the housing market.” • Mozambique (Allen and Johnsen, forthcoming ) A household would require a monthly net salary of 48 000 MT ($1 900) to borrow $40 000 • over a 20 year period to purchase a small apartment in the less attractive areas of the cement city of Maputo. … This is more than the net basic salaries of a couple senior doctors working for the national health system. Annual Conference and General Meeting of African Union for Housing Finance 11 Joaquim Chissano International Center 8 th to 10 th of September 2009, Maputo - Mozambique
HOUSING AFFORDABILITY SITUATION IN SELECTED AFRICAN COUNTRIES-2 Kenya (Alder and Mutero, 2007) Less than 10% traditionally qualified for mortgage loans from HFIs, with the majority • ruled out by their low incomes. Borrowers generally consist of high net worth individuals. • Zambia (Gardner, 2007) Few self-employed people earn sufficient to qualify for a home loan. This leaves the 16% • of all Zambians that are formally employed (2.2-million) as the potential market. Of these, 40% are currently un-banked. Rwanda ( Oyier, Ketley & Davis, forthcoming ) Of the 270 000 formally employed, only around 50,000 people earn above RWF1.2 million • (US$2000) per month. Income of the bulk of the population will fall below the level where they can secure mortgage financing in the formal market. Annual Conference and General Meeting of African Union for Housing Finance 12 Joaquim Chissano International Center 8 th to 10 th of September 2009, Maputo - Mozambique
OTHER MAJOR CONSTRAINTS ACROSS AFRICA • Unavailability of long term funds • Legislation (foreclosure & eviction) • Underwriting (income, ID verification) • Cost, Process and timing in registering title • Reliability of title deeds • Lack of Credit Bureaux to discriminate on risk • Macroeconomic challenges (Interest rates, currency, inflation). • Lack of knowledge of financial products in general (mortgages in particular) • Cultural aversion to debt Annual Conference and General Meeting of African Union for Housing Finance 13 Joaquim Chissano International Center 8 th to 10 th of September 2009, Maputo - Mozambique
RECENT DEVELOPMENTS IN HOUSING MICROFINANCE IN AFRICA • Microfinance is extensive and growing in many African countries. • Housing microfinance growing at a slow pace • Micro finance is mainly donor / NGO-driven • Banks are now setting up microfinance subsidiaries. • The time is ripe for housing microfinance. Annual Conference and General Meeting of African Union for Housing Finance 14 Joaquim Chissano International Center 8 th to 10 th of September 2009, Maputo - Mozambique
GHANA Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Center 8 th to 10 th of September 2009, Maputo - Mozambique
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