Table 2. Conceptual qualitative... | Emerald Publishing

Table 2.

Conceptual qualitative assessment of macroeconomic trends impact on the NHFC incremental housing finance portfolio

Year	Macroeconomic trends	Impact on growth of financing
2003	• A major interest rate hike that has caused an increase in both the cost and price of housing. • A growing number of institutions experiencing struggles, varying from financial difficulty and rent boycotts, to harsh market conditions because of the 2002 credit bubble “burst” in the small banks and micro-finance industry • A challenging target market that is susceptible to job losses	• The corporation has generally performed admirably in carrying out its mandate to provide housing finance solutions for low-income households in South Africa • The corporation’s net revenue increased principally as a result of a rise in investment income. Group operating costs decreased by 3%, but net income after taxes rose by 46%, from R813m to R1,184m
2004	• A surge at the more expensive end of the housing market was a sign that affordability levels had increased generally • Increased interest from the eight Development Finance Institutions (DFIs) to provide financial institutions with risk-curtailing measures for those institutions to be able to support the government’s accelerated delivery goal to end poverty and create jobs • Increased debt burden as a consequence of growing predatory lenders	• The NHFC was subjected to unacceptably onerous administrative burdens and risks as a result of the loan acquisition scheme • Beyond RDP stock and the meagre efforts of PHP, the production of new stock for home ownership remained insufficient • End users’ weakened capacity to afford repayments
2005	• Low inflation and low interest rate levels. • Increased threshold on transfer costs exemptions	• Increased stability in bank participation. • Slow loan take-up by customers, particularly in the market’s social and incremental housing segments • Lower income after tax
2006	• Rising interest rates	• Growth in income after tax from R651m to R769 m
2007	• Rising interest rates	• The higher value of disbursements is related to the higher average loan size for the 782 units financed • Rising average home prices and a dearth of inventory at accessible price points for people with incomes up to R7,000 • The projected amount for commercial loans in 2007 was R419m, whereas actual disbursements came to R1242m
2008	• Ongoing rise in interest rates and the energy crisis. This included rising interest rates, fuel increases and higher inflation. • The Reserve Bank’s interest rate increases had a significant impact on the ability of the low- to middle-income earners to meet commitments on credit agreements	• The ability of households to repay loans and the construction of a number of the planned affordable housing developments have both been put in jeopardy • These have recently led to decreased affordability or the cancellation of new housing developments
2009	• 4.5 % interest rate reduction • Increased unemployment • Changing lending criteria in response to the “Credit Crunch”	• Lenders in the market, including even the larger players, have been affected by the adverse economic environment, increased defaults and generally difficult trading conditions. Most have adopted extremely cautious lending practices • NHFC was able to deliver more units than it had ever sponsored in a single year • Expenses for the year were 20% higher than anticipated • The average size of the incremental loans has increased from the planned R5,000 in the budget to between R6,500 and R10,000 in practice due to the increases in material prices.
2010	• Global economic recover • Declining interest rates • Major job losses • Declining real disposable income • Relatively high levels of debt	• The European Investment Bank and the Agence Française de Développement have both agreed to provide the Corporation with external money in the amount of 20 and 30 million rands, respectively • Lenders are still wary in our markets, and it is still very difficult to get financing for affordable homes • The N’FC's economic activities are subject to the biggest and most significant risk, which is credit risk
2011	NA (Incremental lending was not sufficiently addressed in this report)	NA (Incremental lending was not sufficiently addressed in this report)
2012	• Global economic recover • Declining interest rates • Major job losses • Declining real disposable income • Relatively high levels of debt	• The incremental loans business performed better • Creation of the R1bn guarantee fund to address the GAP market • Signed an agreement with the European Investment Bank for the Rand equivalent of EUR 30m • Concluded an agreement with Old Mutual Insurance Group and its BEE partners to participate in an Affordable Housing Fund with initial funding of R900m • Notable shift in appetite from homeownership to incremental housing
2013	• Uncertainty and generally slow economic growth • Low interest rate environment • Labour unrest brought on by workers’ demands for better wages • Deterioration in the industrial and retail sectors • High household debt levels • Tougher credit standards to households and change in the regulatory environment	• business development leading to a significant number of approvals totalling R14bn • Home ownership was replaced by incremental housing, instalment sales agreements, and private rentals as a result of end user affordability levels and a generally poor adoption of home ownership units because of the lowering rate of traditional mortgage bonds.
2014	• Uncertainty and generally slow economic growth • Low interest rate environment • Labour unrest brought on by workers’ demands for better wages • Deterioration in the industrial and retail sectors	• The NHFC has also observed that its non-banking retail intermediaries, who offer solutions, mostly for incremental housing, continue to have a poor desire for wholesale funding • The quality of the loan books has significantly deteriorated, placing strain on the business.
2015	• GDP growth slowed to 1.5% • Deteriorating economic environment during the year • Low impact on unemployment • Risks to inflation are electricity increases, the exchange rate and wage settlements • The Rand has deteriorated against a basket of currencies	Unsecured incremental housing business was not actively pursued, as the market for this product is highly indebted • The fall of the African Bank Investments Limited • The unsecured lending market – for wholesale lending business – suffered
2016	NA (Incremental lending was not sufficiently addressed in this report)	NA (Incremental lending was not sufficiently addressed in this report)
2017	Prevailing subdued economic and market conditions	• Investment revenue surpassed budget by R40m • The market has remained difficult, which has a negative influence on capital raising and profit • Certain retail lenders moved to the official banking sector
2018	Weak economic growth as reflected in GDP growth of 1.3%	Growth is impacted by both the subdued growth in the economy and the overall market conditions as well as the limited shareholder support
2019	Slow economic growth and tough economic conditions, especially the high unemployment rate	At the end of the fiscal year, there were R31.2m in pledges to community-based organisations and black and women-owned intermediaries, but only R6.5m had been paid out to them overall
2020	Increased social demands, increased unemployment rates and the economic inequality gap. COVID-19 pandemic	• Clients delaying payments in Quarter 4 because of COVID-19 concerns • Decreased disbursements.

Year	Macroeconomic trends	Impact on growth of financing
2003	• A major interest rate hike that has caused an increase in both the cost and price of housing.• A growing number of institutions experiencing struggles, varying from financial difficulty and rent boycotts, to harsh market conditions because of the 2002 credit bubble “burst” in the small banks and micro-finance industry• A challenging target market that is susceptible to job losses	• The corporation has generally performed admirably in carrying out its mandate to provide housing finance solutions for low-income households in South Africa• The corporation’s net revenue increased principally as a result of a rise in investment income. Group operating costs decreased by 3%, but net income after taxes rose by 46%, from R813m to R1,184m
2004	• A surge at the more expensive end of the housing market was a sign that affordability levels had increased generally• Increased interest from the eight Development Finance Institutions (DFIs) to provide financial institutions with risk-curtailing measures for those institutions to be able to support the government’s accelerated delivery goal to end poverty and create jobs• Increased debt burden as a consequence of growing predatory lenders	• The NHFC was subjected to unacceptably onerous administrative burdens and risks as a result of the loan acquisition scheme• Beyond RDP stock and the meagre efforts of PHP, the production of new stock for home ownership remained insufficient• End users’ weakened capacity to afford repayments
2005	• Low inflation and low interest rate levels.• Increased threshold on transfer costs exemptions	• Increased stability in bank participation.• Slow loan take-up by customers, particularly in the market’s social and incremental housing segments• Lower income after tax
2006	• Rising interest rates	• Growth in income after tax from R651m to R769 m
2007	• Rising interest rates	• The higher value of disbursements is related to the higher average loan size for the 782 units financed• Rising average home prices and a dearth of inventory at accessible price points for people with incomes up to R7,000• The projected amount for commercial loans in 2007 was R419m, whereas actual disbursements came to R1242m
2008	• Ongoing rise in interest rates and the energy crisis. This included rising interest rates, fuel increases and higher inflation.• The Reserve Bank’s interest rate increases had a significant impact on the ability of the low- to middle-income earners to meet commitments on credit agreements	• The ability of households to repay loans and the construction of a number of the planned affordable housing developments have both been put in jeopardy• These have recently led to decreased affordability or the cancellation of new housing developments
2009	• 4.5 % interest rate reduction • Increased unemployment• Changing lending criteria in response to the “Credit Crunch”	• Lenders in the market, including even the larger players, have been affected by the adverse economic environment, increased defaults and generally difficult trading conditions. Most have adopted extremely cautious lending practices• NHFC was able to deliver more units than it had ever sponsored in a single year• Expenses for the year were 20% higher than anticipated• The average size of the incremental loans has increased from the planned R5,000 in the budget to between R6,500 and R10,000 in practice due to the increases in material prices.
2010	• Global economic recover• Declining interest rates• Major job losses• Declining real disposable income• Relatively high levels of debt	• The European Investment Bank and the Agence Française de Développement have both agreed to provide the Corporation with external money in the amount of 20 and 30 million rands, respectively• Lenders are still wary in our markets, and it is still very difficult to get financing for affordable homes• The N’FC's economic activities are subject to the biggest and most significant risk, which is credit risk
2011	NA (Incremental lending was not sufficiently addressed in this report)	NA (Incremental lending was not sufficiently addressed in this report)
2012	• Global economic recover• Declining interest rates• Major job losses• Declining real disposable income• Relatively high levels of debt	• The incremental loans business performed better• Creation of the R1bn guarantee fund to address the GAP market• Signed an agreement with the European Investment Bank for the Rand equivalent of EUR 30m• Concluded an agreement with Old Mutual Insurance Group and its BEE partners to participate in an Affordable Housing Fund with initial funding of R900m• Notable shift in appetite from homeownership to incremental housing
2013	• Uncertainty and generally slow economic growth• Low interest rate environment• Labour unrest brought on by workers’ demands for better wages• Deterioration in the industrial and retail sectors• High household debt levels• Tougher credit standards to households and change in the regulatory environment	• business development leading to a significant number of approvals totalling R14bn• Home ownership was replaced by incremental housing, instalment sales agreements, and private rentals as a result of end user affordability levels and a generally poor adoption of home ownership units because of the lowering rate of traditional mortgage bonds.
2014	• Uncertainty and generally slow economic growth• Low interest rate environment• Labour unrest brought on by workers’ demands for better wages• Deterioration in the industrial and retail sectors	• The NHFC has also observed that its non-banking retail intermediaries, who offer solutions, mostly for incremental housing, continue to have a poor desire for wholesale funding• The quality of the loan books has significantly deteriorated, placing strain on the business.
2015	• GDP growth slowed to 1.5%• Deteriorating economic environment during the year• Low impact on unemployment• Risks to inflation are electricity increases, the exchange rate and wage settlements• The Rand has deteriorated against a basket of currencies	Unsecured incremental housing business was not actively pursued, as the market for this product is highly indebted• The fall of the African Bank Investments Limited• The unsecured lending market – for wholesale lending business – suffered
2016	NA (Incremental lending was not sufficiently addressed in this report)	NA (Incremental lending was not sufficiently addressed in this report)
2017	Prevailing subdued economic and market conditions	• Investment revenue surpassed budget by R40m• The market has remained difficult, which has a negative influence on capital raising and profit• Certain retail lenders moved to the official banking sector
2018	Weak economic growth as reflected in GDP growth of 1.3%	Growth is impacted by both the subdued growth in the economy and the overall market conditions as well as the limited shareholder support
2019	Slow economic growth and tough economic conditions, especially the high unemployment rate	At the end of the fiscal year, there were R31.2m in pledges to community-based organisations and black and women-owned intermediaries, but only R6.5m had been paid out to them overall
2020	Increased social demands, increased unemployment rates and the economic inequality gap. COVID-19 pandemic	• Clients delaying payments in Quarter 4 because of COVID-19 concerns• Decreased disbursements.

Source: Author’s own work