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More On Affordability (or Lack Thereof) In South Africa

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The R50 000-a-month property shocker

Realestateweb reporter

07 February 2008

That’s what you need to earn, as a minimum, to qualify for a very ordinary home – interview.

If you are wondering why you can't afford an ordinary home, look no further than your salary slip.

The introduction of the National Credit Act (NCA) has meant that you need to earn at least R50 000/month and be frugal with your cash if you have any hope of qualifying for a bank loan for the average house - and that now costs R962 000, according to Absa.

Before the NCA, banks could look at your income and give you a percentage of this. Now, however, they can only grant you a loan based on what you have left in your account after you have paid all your bills.

Speaking on the Moneyweb Power Hour on Wednesday, Absa property analyst Jacques du Toit confirmed that you have to have about R36 000 in after-tax income to be in a position to buy the average house.

That, in turn, would mean you need a pre-tax income of about R50 000 - a figure that is very far from average in the South African context.

On R962 000, a 100% mortgage will set you back R12 300/month, said Du Toit.

Economists don't see prices plummeting, even though the economy is under pressure and fears are growing in some quarters that we may be heading for a recession.

Instead, Du Toit told Moneyweb Power Hour host Alec Hogg: "People will most probably have to look at smaller, more affordable high-density properties in future."

While new developments have characterised the property landscape in recent years, expect to see fewer new offerings.

"If electricity cannot be provided or guaranteed, many new developments will probably not take place, which will have supply and demand issues focusing on the existing segment of the housing market," said Du Toit.

Absa's latest House Price Index shows that the residential property market is at its lowest rate of growth since December 1999 - and things could still get worse.

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Does the SA bond system portable or does it work like a UK mortgage? If it is the latter, I would think that the vast majority of existing homeowners will have to stay put whether they like it or not. The market will just seize up.


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