Housing Becoming Less Affrordable 3
Is anyone besides me getting a little bit nervous that in a country with an average income of about R50 000 a year, the average house price is now over R900 000?
Average house price to hit R1m markThe average price of a house in South Africa is set to top the R1 million mark next year – and economists warn that this will make it difficult for first-time buyers to enter the market.
The projected price is based on house price index figures supplied by Absa bank, which showed that by April the average price of a house in SA was R911 800.
It’s almost like the UK – average (personal) income is around £22,000 (average household income is £40,000) and an average London shoebox property costs £400,000.
Perhaps though, the difference here is that there are more innovative banking products which allow you to get into the market – such as loan products that allow for only interest payments etc. Also the legal framework exists for groups of previously unknown people to group together and buy a property. Is there any sign of these kind of things coming to market in SA?
I’ve seen ads for interest only loans in SA but I would not reccomend it to anyone. All you’re really doing is renting from the bank at close to double the cost of what an actual corresponding rental would cost. It also encourages people to buy more than they can afford in the hopes of price appreciation coming to their rescue before they have to start paying down the actual capital of the loan.
The current housing semi-meltdown (has it gotten any worse lately?) in the US is primarily caused by the massive increase in interest only loans being used. I read an article that close to 60% of all loans made in California in the last few years were interest only. That’s dangerous territory if you ask me.
You are comparing different “averages” though. R1mil is the average house price for houses over some size and costing less than some other amount, can’t remember, but it is an average in a specific segment.
Average income is computed over a different segment.
But yes, I agree, it is worrying.
And SAHomeLoans should be shot for allowing people to “only pay the interest”.