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Johannesburg - As consumers struggle to shrug off the effects of the recession, latest property price figures show households need an income of more than R25 000 per month to afford the average South African home.
According to the FNB House Price Index for January, released last week, the present average price of a house dropped slightly to R764 912. A consumer who applies for a 100% home loan will have an instalment of R7 636 per month, at an interest charge of 10.5% over a 20-year period.
In line with government regulation, this instalment is not allowed to be over 30% of a household's monthly income, so to afford the average-priced house in South Africa, a household needs an income of R25 455 per month.
The median house price is a tad less expensive, according to Standard Bank's property report released on Tuesday. The report showed a 2.9% drop year-on-year to R545 000 for January 2010. A home loan for a house at this price will cost a household R5 441 per month.
Households 'in deep trouble'
According to Standard Bank economist Johan Botha, the lower median price is also due to the bank's focus on the affordable housing segment, which boosts the number of loans approved at the lower end of the market.
Banks like Nedbank and Standard Bank started offering 100% home loans in September 2009 to lure home buyers back into the market. However, consumer pressure did not let up.
"It's looking like the economy fared a little worse last year than expected," said Botha. "We expected a strong decrease in bad debts but the recovery's been disappointing."
According to Botha, households are in deep trouble. Of the 18.01 million credit-active consumers at the end of September 2009, only 9.9 million (55%) were in good standing. Three million (17%) were more than three months in arrears, and 2.7 million (15%) landed up on adverse listings.
"It's not an ideal time to see house prices shooting upwards," said Botha. "The interest rate will start rising again at the end of the year and the country's seen huge job losses."
- Fin24.com