Impediments to mortgage borrowing for the under-served urban household in South Africa

This paper examines impediments to mortgage borrowing in South Africa. The analysis is premised on the fact that, despite South Africa's relatively sophisticated financial system compared to other countries in sub Saharan Africa, its housing finance system has not been able to replicate for the low to moderate income families a system that allows them access to adequate formal housing finance. The paper is in three parts. Firstly, it gives an overview of the current demographic and housing situation in South Africa and provides an awareness of developments in the housing market, especially for the suburban sector, which helped to ascertain the nature of the housing finance problem. Secondly, empirical findings on the impediments to household borrowing are presented in the context of a case study of Umlazi, near Durban in KwaZulu-Natal Province of South Africa. This helps in identifying what needs to be done to improve institutional mortgage borrowing by the underserved urban market. Based on this analysis, the paper suggests measures that could enhance the affordability and access to adequate institutional finance in the study area and economies in similar situations.