Finding'the'niche'market'in' housing'finance'in'Malawi - PDF document

1 Finding'the'niche'market'in' housing'finance'in'Malawi Seminar'on'Housing'Finance'in'Malawi Sunbird'Lilongwe'Hotel,'Malawi 13'April'2016 2 www.auhf.co.za • An#association#of#various#parties#involved#in#the#mobilisation#of#funds#for#shelter#and# housing#on#the#African#continent • The#AUHF#actively#seeks#ways#to#incorporate#and#assist#participation#in#the#housing#finance# market#in#Africa • The#AUHF#is#committed#enabled#and#productive#housing#finance#sector#across#Africa#where# governments#and#the#private#sector#work#together#to#develop#and#maintain#efficient#and# effective#housing#markets#and#access#to#adequate#and#affordable#housing#for#all.#

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5 9VaVR��N_R�ObV�a�aUR�dNf�aURf�N_R�SV�N�PR��h 8R_a_N���FR�Nb�$��10, 6 Housing'in'Malawi' (Integrated3 Household3Panel3Survey32013) : • 41%3households3live3in3traditional3 dwellings • 26%3in3semiFpermanent3housing • 33%3in3permanent3dwellings3 (51%'in'urban'areas) The'macroNeconomic' • 46%3of3urban3households3rent context'is'not'favourable • Most3housing3built3by3owners,3 • High3interest3rates:332% paid3for3in3cash3and3with3savings • High3inflation:323.4% • Few3developers • Limited3infrastructure Housing'pressures'are'increasing • No3national3ID3system • Almost3half3of3the3population3is3under314 • Very3low3lending3to3real3 • Very3rural,3with3a3high3urbanisation rate:3 estate3activities:31.1%3of3 3.8% GDP3in32014 • Moderate3unemployment:37.6% • 16.1%3of3Malawians3have3 • Very3low3affordability:361.64%3live3on3 a3bank3account less3than3$1,25/day 9VaVR��N_R�ObV�a�aUR�dNf�aURf�N_R�SV�N�PR��h 8R_a_N���FR�Nb�$��10,

7SS�_�NOV�Vaf��S�P���bZR_��V��N�PUN��R�TR�NP_���� 7 aUR�P��aV�R�a Africa*) Annual*Household*Income,*2014* Some#mortgage# affordability#but# 0.1*% >*$50*000 0.6*% limited#access $25*000)$50*000 1.2*% 0.4*% In#most#cases,# $14*000)$25*000 2.4*% 0.9*% subsidies#don’t#bridge# 2.4*% $8*000)$14*000 4.7*% affordability#to#buy#a# $5*000)$8*000 new#house.##In# 4.2*% 5.9*% others,#they#cause# $3*600)$5*000 4.5*% 4.8*% new#affordability# $2*400)$3*600 7.7 % 5.3*% challenges. 59% 41% $1*600)$2*400 4.6*% 8.6*% $800)$1*600 5.5*% 15.9*% <$800 2.4*% 14.1*% Thousands 40000 30000 20000 10000 0 10000 20000 Rural Urban While3urban3populations3have3higher3levels3of3affordability,3these3are3still3 very3low.33Less3than310%3of3households3can3afford3a3mortgage3for3even3the3 cheapest3newly3built3house.3 7������V��aUR�P��a��S�U�b�V�T2� @R�fN 8 Rural Urban. >*$50*000 Income'distribution'and'housing' affordability'in'Kenya $25*000)$50*000 10% $14*000)$25*000 $*8*821 $8*000)$14*000 $5*000)$8*000 $3*600)$5*000 $*4*140 $2*400)$3*600 G�b_PR2� C-GIDD (CanbackGlobal $1*600)$2*400 Income Distribution Database www.cgidd.com). Data accessed in $800)$1*600 August 2015 <$800 Thousands 3000 2500 2000 1500 1000 500 0 500 1000 Average*income*needed*for*the*cheapest*newly*built* Average*Annual*HH income,* urban* house*by*a*formal*developer,* 2015 2014 The3cheapest3newly3built3house3built3by3a3private3developer3in3Kenya,32015,3was3 US$17'000 .33Even3this3is3only3affordable3to3about310%3of3the3urban3population.33The3 income3required3to3buy3this3house3is3double3the3avg annual3hh income3in3urban3areas. There3is3a3disconnect3between3the3price3of3formal,3developerFbuilt3housing3and3the3affordability3of3 the3population.3The3vast3majority3of3the3population3across3the3continent3live3in3houses3they3built3 themselves,3with3various3degrees3of3success3and3quality.3Can3developers3&3investors3shift3their3 emphasis3to3meet3the3needs3of3the3majority?

7���aUR�P��a��S�SV�N�PR2� BN�NdV 9 Rural Urban >)$50)000 Income'distribution'and'housing' affordability'in'Malawi $25)000($50)000 $)14)666 $14)000($25)000 $8)000($14)000 $5)000($8)000 $3)600($5)000 $2)400($3)600 $1)600($2)400 $)2)103 $800($1)600 <$800 2500 2000 1500 1000 500 0 500 Thousands Average)income)needed)for)the)cheapest)newly)built) Average)HH income,) 2014 house)by)a)formal)developer,) 2015) G�b_PR2� C-GIDD (CanbackGlobal Income Distribution Database www.cgidd.com). Data accessed in August 2015 In32015,3the3cheapest3house3being3built3by3a3private3developer3in3Malawi3was3 US$14'100 .33At3current3lending3rates3(32%3over3153years)3,3only31,1%3of3the3 urban3population3can3afford3this.3Average3household3income3in3urban3areas3is3 only39%3of3what3is3needed3to3afford3this3house.33 10 Uaa�2��ddd&U�b�V�TSV�N�PRNS_VPN&�_T�PN�Pb�NaV�T%Z�_aTNTR%N��%U�b�V�T% NSS�_�NOV�Vaf%V�%NS_VPN�

?S�dR�_R�bPR��aUR� 11 P��a��S�aUR�U�b�R�a�� IG ������$���bO�R� aUR��bZOR_��S�b_ON�� BN�NdVN���P�b���OR� �R_cR��h Oba�aUV��V�� �aV������f�+!��S�aUR� a�aN��b_ON�� ���b�NaV��& 7SS�_�NOV�Vaf�S�_�N� ��$���� U�b�R�dVaU�aUR�Z�_aTNTR�V�� �VZVaR��NP_����7S_VPN B�gNZOV�bR2���! • LNZOVN2��.! • CVTR_VN2�--! • ;aUV��VN2�+! • LVZONOdR2�-�! • =UN�N2���! • HN�gN�VN2��&,! • Uaa�2��ddd&U�b�V�TSV�N�PRNS_VPN&�_T�PN�Pb�NaV�T%Z�_aTNTR% N��%U�b�V�T%NSS�_�NOV�Vaf%V�%NS_VPN� 12 G��dUR_R�N_R�aUR�����_ab�VaVR�5 $45 000% $250 000 000% $38 720% $40 000% $200 000 000% $35 000% Potential)Loan)Size)(US$) $29 040% Potential)Booksize)(US$) $30 000% $150 000 000% $25 000% $20 000% $100 000 000% $15 101% $15 000% 1.1%%of%the%urban% $8 518% household%population%can% $10 000% afford%the%cheapest newly% $50 000 000% $5 034% built%house%which%equates% 5%%of%households in%this% $3 330% to%6%888%loans% $5 000% $2 323% bracket% represents% 32%427% $1 549% $929% $310% unrealised%laons% $, $, $400% $1 200% $2 000% $3 000% $4 300% $6 500% $11 000% $19 500% $37 500% $50 000% Annual)Household)income)(US$) Potential%Booksize%(15%year%term%at%32%%interest%rate) Potential%Loan%amount%(15%year%term%at%32%%interest%rate) 1. Reduce3the3cost3of3housing. 2. Deconstruct3the3housing3delivery3process3to3 accommodate3smaller3loans,3and3build3housing3 incrementally,3but3at3scale. 3. Resolve3macroFeconomic3issues