Implications of macroeconomic risks on NHFC'S incremental housing finance in South Africa

Abstract

PURPOSE – The challenge of accessibility to adequate housing in several countries by a large percentage of citizens has given rise to different housing programs designed to facilitate access to affordable housing. In South Africa, the National Housing Finance Corporation (NHFC) was created to provides housing loans to low- and middle-income earners. Thus, the purpose of this study was to evaluate the implication of the macroeconomic risk elements on the performance of the NHFC incremental housing finance. DESIGN/METHODOLOGY/APPROACH – This study used a mixed-method approach to examine the time series data of the NHFC over 17 years (2003–2020), relative to selected macroeconomic indicators. Additionally, this study analysed primary data from a 2022 survey of NHFC Executives. FINDINGS – This study found that incremental housing finance addresses a housing affordability gap, caters to disadvantaged groups, adapts to changing macroeconomic conditions and can mitigate default risk. It also finds that the performance of the NHFC’s incremental housing finance is premised on the behaviour of the macroeconomic elements that drive its strategy in South Africa. ORIGINALITY/VALUE – Unlike previous works on housing finance, this case study of the NHFC considers the implication of macroeconomic trends when disbursing incremental housing finance to low- and middle-level income earners as a risk mitigation measure for the South African market. Its mixed method use of quantitative and qualitative data also allows a robust insight into trends that drive investment in incremental housing finance in South Africa.