Fiscally Unsustainable Social Welfare, UntenableHousing Solutions and the Mortgage Default Ratioin South Africa

Vuyisani Moss
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Vuyisani Moss: Research Analyst at the National Housing Finance Corporation (NHFC) in Johannesburg, South Africa

International Journal of Finance & Banking Studies, 2013, vol. 2, issue 4, 45-59

Abstract: This article reflects on social welfare systemand governance of housing markets from an end-user perspective. The article critically analyses the way in which social welfare has correlated to unsustainable development and created self entitlement behaviours and attitudes in the South African low income housing market. The phenomenon was demonstrable by empirical research whose findings confirmed an existence of an association between a fully subsidized social housing model (as underpinned by South Africa’ssocial welfare)and propensity to default onmortgages. The study found that the risk of default by homeowners inthe low income housing market in South Africa is influenced by government’shousing grant model. In other words, the research established that the principle of servicing a mortgaged starter property (that is almost similar to a government free house bybothstructure and design)is not universally accepted byhomeowners of thesemortgaged houses. The unintended consequences are that the system has created indefinite expectations that potentially could; (i) erode the country’s balance sheet; (ii) add to non-payment behaviour; (iii) pressurize the economic and credit systems;(iv) propagate entitlement attitudes and mindsets;(v) create social instability and (v) widenedthe country’s balance of payment deficits.

Keywords: Finance; Mortgage; Housing; Credit; South Africa (search for similar items in EconPapers)
Date: 2013
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