Joburg tops for affordable homes

2011-01-13 11:06

Johannesburg - Port Elizabeth and Johannesburg are the most affordable cities for home buyers, a property group said on Thursday.

"Port Elizabeth and Johannesburg currently appear to be the best SA cities in which to buy a home, according to the latest housing and salary statistics, for the simple reason that they offer the best affordability," said Hano Jacobs, CEO of the Realty 1 International Property Group.

"And this does not mean that people here get paid the highest salaries, only that these two cities offer the best balance between house prices and salaries."

He said in Port Elizabeth the average white collar salary was 16% lower than the national average of R19 293 per month, according to online placement company JobCrystal.

The latest Absa Housing Review finds the average price of a middle segment house in the Port Elizabeth/Uitenhage Area was 16% less than the national average of R1.02m.

This means the monthly home loan repayment would be equal to 43% of that salary.

"In Johannesburg, white collar workers generally earn about 4% more than the national average, but house prices are also somewhat higher than the average, and the bond repayment to salary ratio is once again 43%."

Bloemfontein and Pretoria were considered the next best cities, with the repayment ratio at 46%.

Cape Town, however, fared less well.

"... a combination of lower-than-average salaries and much higher-than-average house prices in Cape Town mean that buyers in that city can expect to hand over 52% of their salary each month to cover the bond repayment on an average home."

Durban, with its depressed house prices and salaries below the national average, had a ratio of 48%.

"However, it is also worth noting that another JobCrystal survey recently found that employees are generally happier if they live in a smaller city rather than a major metro, and that Durban has the highest happiness rating of all SA cities, at 61% of employees," he added.

The Eastern Cape cities followed at 60%, then Pretoria (57%), northern Johannesburg (56%) and Cape Town (55%).
Realty 1 based its home loan calculations on a deposit of 10% on a 20-year home loan, repayable at 9% interest per annum.

  • Bull Dust! - 2011-01-13 11:22

    Sooooo? Then you need to rob and steel + beg for a morgage at that level- as the banks work on a ration of no more than 35% disposable income to spend on a bond- thus you will not be able to apply for the bond if your monthly payments are 40%+ Sooo WTF?

  • Justin - 2011-01-13 12:34

    Well, they are talking here about average prices. Plus, they appear to be talking specifically about "houses". Most people don't enter the property market by purchasing a house, but rather a simplex or flat. It is also possible to purchase a property at under market value if you take the time to educate yourself. Lastly, you neglect the fact that your average household is earning two salaries and not one. It's not all gloom and doom :)

  • Massage the Stats - 2011-01-13 12:43

    A well thought out and erudite piece... 99% truth and 1% lie, the best strategy for catching both the 97% of South Africans who earn peanuts and the other 3% who consistently buy above their capacity where only about 0.5% can actually afford their bonds... I won't bother with the ratios as they're obvious to any half-smart fool who bothers to check. That "affordability" word, nice try! Guess what Mr Property Agent? ... watch the stagflation over the next couple of years... durable asset classes down, down, down, drown while consumables WILL quadruple at a minimum. Go check the price of a can of tuna over the past two years, I won't even bother trying to justify the argument to you as it's a self-fulfilling prophecy. People are going to start really struggling over the next 18 months just to put food on the table and nice-to-have's like "house ownership" will take on a distinctly unpleasant taste at the current extremely high price to income ratios. At 35% of gross you have to be an absolute moron to buy a house at this time at current prices. 1.6 bars at current bank rates takes on a sickly hue when you factor in REAL inflation i.e. the stuff that hits the consumer, not the government and banks fetishes. Add 10% to the 1.6 bar bond and see the dominoe's tumble. This doesn't even consider the utterly sub-standard building quality of properties built over the past 15 years which adds a whole different dimension when compared to the stricter building standards in the US and Europe, oh, and guess where the US property market is heading sans their REAL consumer inflation? (see Dare I say it? REAL deflation in durable asset classes is on the cards and like a vulture, it has patience, it sucks in every uncautious and financial illiterate and slowly squeezes them until they're barely breathing, and then it swoops down and feasts. The boomerang of profligacy always comes back Mr Realtor and no manner of stating the facts in honeyed words will stop it. You better be able to catch that boomerang when it arrives. OMHO

  • matt - 2011-01-13 13:50

    @Bull Dust. We're talking household income here - 35% of both earnings.

  • Geyser - 2011-01-13 16:07

    Lies, damned lies and statistics. This is one of the most misleading piece of information. Except for a very minute minority, who earns R19,293 per month? and what % of SA families can afford a R1 million homes? Why don't you tell what % of SA population earns R19,293 and above? It seems that the analysts are shutting out the vast majority of the people of this country from statistical data as if these people don't exist.

  • Andre - 2011-01-14 09:23

    Interesting read. @Geyser - the article states that these figures are based on White Collar jobs and not blue collar or informal traders. This includes mostly people who had the opportunity to go study. This does exclude the vast majority of South Africans.

  • Massage the Stats - 2011-01-14 10:08

    @Geyser: You are 100% correct, though the statistical alchemy leading to a per capita average of 19.2k is arrived at by including the incomes of all those people who resemble Jabba-The-Hut, the top level politicians and CEO's, that component of the top 3% who take home in excess of 1 bar, whose collective income makes up more than 50% of SA's take home cash. Of course the per capita is going to look good. My personal guess is that the per capita take home is around 8k to 9k and includes earners up to 300k per anum. If you take the bottom 97% its more like 4k to 5k. During the party people could sell their homes for say R1.3 bars and then upgrade to R2 bars, assuming they've paid off a large portion of the bond. It's all about that back-breaker at around 1 bar for most earners. The point here is that its not about the current value of the property but rather about the outstanding bond as a % of monthly gross income. Some people (minority) were smart and made sure they upgraded into a manageable bond but the majority went and upgraded into a bond they could hardly carry at the rate while others went and maxed out their bonds to buy that beemer and flatscreen. These guys are just holding on at the current low rates and are bargaining that they'll get 2 bars for that MacMansion. Enter stagflation, sit back and watch the carnage unfold. I got out of property in 2005 as I saw this coming, bit early, but at least I have my risk managed. Good luck to those who still believe their property is still worth the 2007 price.

      Meanleader - 2011-03-30 17:15

      Do you snort coke Massage the stats ? You are sharp boet ! maybe too sharp for the intellectuals here !

  • Mike - 2011-01-14 10:22

    I would be interested to hear what those ratios are in international terms as they so not sound too high to me. I think that in big cities it is not uncommon for one spouse's salary to go almost exclusively to the bond and the other salary used to live on but the grapevine can be a dangerous thing to listen to. What I would love to know is the combined household spend on car repayments vs. bond repayments as I believe this stat will be significantly different to the International average. One thing for sure is that houses will not get any cheaper in the medium and long term so families will have to compromise somewhere and priorities will have to shift.

  • CF - 2011-01-14 10:26

    @Geyser: Most countries in the world have the situation that the vast majority of people do not own homes i.e. they rent. We should be no different i.e. only those that earn an appropriate salary should be able to afford a house. Get realistic - not everyone deserves to own a house!

  • ss - 2011-01-24 10:46

    The figures for worker happiness are shocking. We need to find a way to free ourselves from wage slavery.

  • Gray - 2011-01-24 14:18

    I don't know how people live. My bond is 25% of my NETT Salary and still battling. (How do people afford over 40% ??) .

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