Housing the World: Leveraging Private Sector Resources for the Public Good December 11-12 Bangalore, India Simon Walley Housing Finance Program Coordinator
Housing the World: Leveraging Private Sector Resources for the Public Good
December 11-12Bangalore, India
Simon WalleyHousing Finance Program Coordinator
Content
2
Challenge
Obstacles
Opportunity
Solutions?
Title of Presentation 3
Trends in Global Slum Population
4
Slum Population
% of globalslum
population% of urban population
China 181 million 25% 29%
India 105 million 15% 29%
Nigeria 48 million 7% 63%
Brazil 45 million 6% 27%
Pakistan 30 million 4% 47%
Source: UN data, WB own calculation
• 5 countries account for 57% of total global slum population
• Overall proportion of population living in slums is falling
• But as Urban population is rising, total slum population still on the increase in certain regions
0%
10%
20%
30%
40%
50%
60%% of Urban Population living in slumconditionsTrend up to 2030
Proportion of Urban Population living in slum conditions
5
0%
10%
20%
30%
40%
50%
60%
70%
80%
Sub-Saharan AfricaMiddle East & North AfricaLatin America & CaribbeanSouth AsiaEast Asia & PacificEurope & Central Asia
• All regions expected to show fall in proportion of urban population living in slum conditions
• Sub-Saharan Africa shows slowest level of decline
• Latin America also goes from 2nd lowest to 2nd
highest
Source: UN data, Projections are WB own calculations based on simple linear trend
Global Slum Population by region
6
• At global level slum population is on a downward trajectory both in absolute numbers and as a proportion of overall urban population
• Except in Africa where rapid population growth means that improvements in city conditions are outweighed by urbanization growth
-
50
100
150
200
250
30019
9019
9520
0020
0520
0720
1020
1520
2020
2520
30
Mill
ions
Sub-SaharanAfricaMiddle East &North AfricaLatin America &CaribbeanSouth Asia
East Asia &PacificEurope &Central Asia
Low Penetration levels for Housing Finance Globally across both LICs and MICs
[0,5](5,15](15,25](25,35](35,60]No data
Has a Loan to Purchase Home/Apartment (% adults)
Source: Findex Global Financial Inclusion Survey, 2012
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Housing Finance Penetration Levels
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HIGH‐INCOME ECONOMIES DEVELOPING ECONOMIESGENDER
FEMALEMALE
AGE GROUP15‐2425‐6465+
WITHIN‐ECONOMY INCOME QUINTILE
POORESTQ2Q3Q4
RICHEST
EDUCATION LEVELPRIMARY
SECONDARYTERTIARY
RESIDENCE
RURALURBAN
0 20 40 60 80 100020406080100
020406080100 0 20 40 60 80 100
020406080100 0 20 40 60 80 100
020406080100 0 20 40 60 80 100
020406080100 0 20 40 60 80 100
EDUCATION LEVEL
RESIDENCE
WITHIN‐ECONOMY INCOME QUINTILE
AGE GROUP
GENDER
Note: Primary includes those with less than a primary education; tertiary includes those with more than a tertiary education.Source: Demirguc‐Kunt and Klapper 2012.
Low Penetration levels across all developing economies, but especially among the young, and those on lower incomes even in developed economies
Current size of mortgage markets and urban growth projections by income group
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While mortgage depth averaged 40% in high income countries (2006-2010), it averaged 5%-10% for middle income nations and less than 1% for low Income economies, In contrast, projected urban growth rates between 2015 and 2050 are highest for low and lower middle income countries.
0.0% 1.0% 2.0% 3.0% 4.0%
High income
Upper middleincome
Lower middleincome
Low income
Urban Population Growth By Income Group (2015-2050)
0%5%
10%15%20%25%30%35%40%45%
High income Upper middleincome
Lower middleincome
Low income
Mortgage Depth (2006-2010) and Penetration (2011)
Mortgage Depth
MortgagePenetration
Urban growth projections and housing finance development by region
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0% 10% 20% 30% 40% 50% 60% 70%
North America
East Asia & Pacific
Europe & Central Asia
Middle East & North Africa
Latin America & Caribbean
Sub-Saharan Africa
South Asia
Mortgage depth (2006-2010) and Penetration (2011)
MortgagePenetration
Mortgage Depth
The mismatch in housing finance market development is also evident across regions, with North America, and East Asia and Pacific regions showing the highest mortgage depth and penetration, and South Asia and Sub-Saharan Africa the lowest.
0.0% 2.0% 4.0%
North America
Europe & Central Asia
Latin America & Caribbean
Middle East & North Africa
East Asia & Pacific
South Asia
Sub-Saharan Africa
Annual Urban Growth Rates By Region (2015-2050) Though the fastest growing
urban cities are located in South Asia and Sub-Saharan Africa, these regions currently have relatively underdeveloped mortgage markets.
Housing Finance 2030 Roadmap
11
Source: World Bank mortgage Database
43 Countries >15% mortgage
debt/GDP
17 Countries <15% but >5% mortgage
debt/GDP
135 Countries >5% mortgage
debt/GDP
135 Countries have mortgage debt levels lower than 5% of GDP equivalent. Of these a number of high/upper income countries such as Qatar, Gabon, Hungary, Chile
Mortgage Debt to GDP
Content
12
Challenge
Obstacles
Opportunity
Solutions?
Obstacles to Meeting Housing Gap
Demand for Housing
• Lack of long term funds• Credit Risk• Informality/low incomes• High interest rates• Foreclosure system• Lack of affordable housing• Financial literacy
Lack of Effective Demand
• Availability of Developer finance (debt and equity)
• Planning and building regulations
• Cost of infrastructure• Access to Land• Titling/Registration system
Lack of Affordable Supply
Supply of Housing
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Drivers of Housing Finance
Variable Impact
Inflation volatility -
Age of Population +
Development of Insurance sector +
Urban Population +
Overall wealth – GDP per capita +
Government Bond Market -
Government Bank ownership -
Private Capital Market +
Creditor Rights +
Property Rights +
Source: Badev, A; Beck, T; Vado, L; Walley, S; Housing Finance Across Countries, World Bank Policy Research Paper, January 2014
Content
15
Challenge
Obstacles
Opportunity
Solutions?
16
Affordable Housing is a Global Economic Opportunity
Source: McKinsey Analysis
Value of affordable housing shortage, 2012, $ Billions
High Shortage and market attractiveness
Developed market, redevelopment opportunity
Other emerging market opportunity
Potential Economic Stimulus from Housing
Source: McKinsey Analysis 17
Ksh 502,515
Ksh 343,964
Ksh 0
Ksh 2,656,203
Ksh 1,800,463 ($22,283)
($32,874)
($6,219)
($4,257)
50%
30%
15%
4% 1%
Kenya Example - Urban Income Distribution
Potential Mortgage Market (8%)
Kenya – Potential Opportunity
•No affordability in Rural areas – income not high enough for mortgage market to develop
•In Urban areas just 8% of the population could afford a mortgage product.
•Represents around 1.4 million people or 350,000 households
•Potential mortgage market therefore around Ksh 1,128 billion or $13.7 billion
Content
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Challenge
Obstacles
Opportunity
Solutions?
Reducing Affordability Gap
21Source:McKinsey Global Institute analysis
World Bank impacts the entire housing value chain – example for sub-Saharan africa
22
Land and Tenure
Water, sanitation power
Financing
Building Materials
Design and building skills/services
Housing & Construction
Community Development
Govts. Often don’t provide essential services -drinking water, sanitation
Banks target the wealthy, interest rates high: 16-19% in nominal terms
Local developers lack skills, staff, capital to manage large scale projects
Steel & cement costs >20% higher in SSA vs. China, India, CIS, Turkey
SSA residential construction costs >2x South Asia, China
Schools, clinics, groceries, supplies, proximity to livelihoods, transportation
High costs, long delays to transfer titles, register liens
WB support for EE reforms, housing & urban policy >8 SSA countries
WB & IFC invest in infra-structure
WB & IFC invest in mortgages, MFIs, capital markets growth in >12 SSA countries
IFC invests in cement, steel in >15 SSA countries
IFC invests in developers & builders
IFC invests in developers & builders
WB Urban work, IFC’s ASHA standards for sustainable developments
Housing Finance Solutions•Development of solid primary market basis – efficient property rights, credit risk management systems, consumer information/protection, regulation
•Strong products which are long term, affordable and limit risks for households and financial system
•Secondary markets to leverage impact by using capital markets
•Information systems – data collection, research and analysis
•Developer finance – equity & debt
Conclusion•Take holistic approach across housing value chain to obtain maximum economic benefits
•Clear role for government in improving enabling environment rather than as property developer
•Create housing finance system to allow for long term investment into housing – leverage capital markets
•Provide solutions across the income distribution – make use of smart subsidies or partial guarantees to work in tandem with market based pricing
•Home-ownership not only option – rental should play role as part of inclusive housing policy
Feedback to:
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