*Article updated on 23 May 2022
Homeownership affordability is under the spotlight as the Reserve Bank is forced to buffer inflation in a fragile economy. As a homeowner, how much disposable income you have left after your bond payment – factoring in the rising costs of living – is vital.
According to the latest take-home pay data from BankservAfrica, the average real take-home salary for February 2022 decreased by 4.1% as the share of casual and weekly workers in the BankservAfrica database continued to climb after the massive 2020/21 Covid-19 pandemic shock.
The BankservAfrica Take-home Pay Index (BTPI) shows the average salary for February was R15,517 on a seasonally adjusted basis in real terms. This is in line with the revised BTPI base, adapted to the CPI in December 2021. The nominal average take-home pay was 1.3% up and reached R16,022 in February 2022.
Year on year, however, in nominal terms, take-home pay remains unchanged. In real terms – factoring in inflation – South African workers are poorer than a year ago, with take-home pay declining 5.2%, the index shows.
So how much home can you buy if you earn the average take-home salary? Want a clear picture of what you can and can’t afford? Try Property24’s list of affordability calculators and tools here.
We used these calculators to outline the minimum gross salary requirement, monthly bond payment and total sale costs required for the most affordable price bands, right now as detailed below – keeping in mind a household of two average salaries would mean a possible combined affordability of about R25 000.
| Bond Value | Minimum gross salary required (before tax) | Total registration and bond costs required | Monthly bond payment at 8.25% interest rate |
| R750 000 | R21 301 | R52 365 | R6 390 |
| R1 000 000 | R28 402 | R60 295 | R8 520 |
| R1 500 000 | R42 603 | R88 872 | R12 780 |
| R2 000 000 | R56 804 | R129 917 | R 17 041 |
| R2 500 000 | R71 005 | R181 202 | R21 301 |
| R3 000 000 | R85 206 | R246 747 | R25 561 |
House prices are up all over the country, and with inflation and interest rates also on the rise, newcomers to the property market need to hurry and buy now, even if it means their first home is smaller and cheaper than they originally planned.
“Fortunately, there are many people who are able to work from home most of the time now, which means they can consider a property that is further from the centre of town, where land is generally less expensive,” says Gerhard Kotzé, MD of the RealNet estate agency group.
“Meanwhile there are those who still need or prefer to be close to a city centre because it means they can do without a vehicle, and they will find that the developers are back in the market now with small apartments that are relatively affordable.”
“But whatever your preference is – and this actually goes for repeat buyers too – it is time to buy before rising costs make it very difficult, if not impossible, for you to finance your home purchase.”
“For a start, the rate of inflation has risen steadily and is now running at close to 6% a year, due mostly to higher fuel and electricity costs. This is what prompted the Reserve Bank to raise rates, but it also means that most households have less disposable income, which is one of the key factors that banks look at when considering a home loan application.”
“In addition, many households now have considerably higher debt levels than they did at the start of the Covid-19 pandemic in 2020. In fact, (according to the National Credit Regulator) many are paying more than half of their after-tax income towards the reduction of debts such as credit card balances, personal loans and vehicle purchases – and given that wages and salaries are quite static at this stage, every interest rate rise is going to increase that debt repayment percentage.”
Having said that, however, it is important to note that property prices have also risen quite considerably in the past year. According to property data company Lightstone, the national average annual increase was 4,6% in December 2021, with several provinces showing much higher increases than that.
And with further electricity, fuel and other cost increases slated for this year, there is going to be less and less room for homebuyers to afford or qualify for a bond that is going to cost them anything more per month than their current monthly rent or bond repayment, says Kotzé.
“In addition, interest rates in the US and elsewhere are also set to keep rising now to combat inflation, and the Reserve Bank will need to follow suit in order to ensure that SA stays competitive in attracting investment. So it is very likely that affordability will decline even further and that it will become progressively more difficult for prospective buyers to qualify for home loans.
“So there really is no time for home buyers to waste now, and our advice would further be that they look seriously at buying smaller, less expensive properties now in order to ensure that they have some financial leeway to cope with the effects of increasing interest rates over the next 12 to 18 months.”
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