Creating a Development Bank to Finance Affordable Housing in South Africa is a Timely Catalyst to Address Demand and Supply Challenges

Creating a Development Bank to Finance Affordable Housing in South Africa is a Timely Catalyst to Address Demand and Supply Challenges

Vuyisani Moss
Copyright: © 2019 |Pages: 16
DOI: 10.4018/IJSS.2019010104
(Individual Articles)
No Current Special Offers


The twin problems of affordability and accessibility that hamper the progress of housing in our country need to be addressed on a sustainable basis and the state needs to take on the role as a facilitator to create the enabling environment to encourage greater private sector participation. As a consequence, it is quite opportune to establish the Human Settlements Development Bank (HSDB). The mortgage finance affordability challenge is also attributable to key essential drivers, namely; house price index, disposable income, and the mortgage interest rates.
Article Preview

1. Introduction

1.1. Conceptual Framework

The article is underpinned within the model of the Keynesian theorists which is a direct alternative to the neo-classical theory. Advocates of neo-classical economics assume that markets are harmonious, self-regulating mechanisms and, in addition, postulate that market forces operate more freely and effectively when unregulated. The fundamental principle of Keynesian theory was developed by Keynes (1936) during and after the Great Depression which advances the need for government intervention as a corrective for economic instability (Keynes, 1936).

Proponents of Keynesian theory assume that government intervention is necessary to ensure an active and vibrant economy.

According to the underlying principles of this model, government should stimulate demand for goods and services in order to encourage economic growth. Keynes (1936) advocates general public sector participation in assisting the economy. The basis of Keynesian doctrine is the justification of government intervention in the economy through public policies and legislative instruments aimed at achieving full employment and price stability. The author found the principles underpinning the Keynesian theoretical model to be of most significance relative to the problem statement of the article.

The application of Keynesian theoretical assumptions and suppositions appear to have a pragmatic value as Keynesians maintain that in order to maintain equality the government must step in to regulate markets in general. This, according to Keynesians, will lead to poverty eradication and the lessening of inequality between members of society. The markets will be transformed and more responsible towards consumer needs. This in turns suggests that consumer interests will be justly realised and thus, proportionately influence consumer behaviour, market conduct and trading trends. The author concurs that in the absence of effective government regulations and interventions, the market imbalances and even distribution of resources will remain thus perpetuating stagnancy of real estate market activity.


3. Property Sector System In South Africa

The size of the property sector in South Africa is overwhelming. The South African property sector was valued at R5.8 trillion1 in 2016. In the same year the South African Reserve Bank estimated the total value of all fixed capital stock, i.e. property, machinery, transport to be at R7.6 trillion. This means that property constitutes 78% of all fixed capital stock in the country. The largest property sub-sector is Residential worth about R3.9 trillion. The Residential property sector contributes R68 billion to the GDP and R23 billion contribution to taxes.

Complete Article List

Search this Journal:
Open Access Articles: Forthcoming
Volume 6: 2 Issues (2019)
Volume 5: 2 Issues (2018)
Volume 4: 2 Issues (2017)
Volume 3: 2 Issues (2016)
Volume 2: 2 Issues (2015)
Volume 1: 2 Issues (2014)
View Complete Journal Contents Listing