Property prices in South Africa have continued to rise steadily, and data from 2024 indicates that homeownership remains a challenge for many.

Despite below-inflation growth in property prices, South Africans need to earn more than R8,000 above the national average salary to afford an average house.

The cost of housing is outpacing income growth, leaving many potential homeowners struggling to enter the market.

According to the latest Residential Property Price Index (RPPI) for the first quarter of 2024, compiled by StatsSA, residential property prices have risen by 23.8% over the last five years.

However, the increase has not been uniform across the country, with certain provinces experiencing higher property price growth than others.

The RPPI tracks changes in property prices for various residential property types, such as houses, townhouses, and flats, all purchased by private individuals.

The data is based on property transactions recorded by the Office of the Chief Registrar of Deeds.

The RPPI not only offers a national perspective on property price trends but also breaks down the data at provincial and metropolitan levels.

Over the five-year period from 2019 to 2024, the national average property price rose by 23.8%, which amounts to an annual increase of 4.8%.

Leading the growth was the Western Cape, where property prices surged by 35.5% during this time.

In contrast, the Northern Cape experienced a mere 0.9% increase, the slowest in the country, while Gauteng’s property prices grew by 16.4%, falling below the national average.

However, simply looking at the rise in property prices does not give the full picture. When adjusted for inflation, property values nationwide have actually decreased by 3.9%.

Inflation during the same period was recorded at 27.7%, meaning that in real terms, property values have dropped in most provinces.

Only in the Western Cape, where prices increased by 7.8%, has there been any meaningful appreciation. In provinces like Mpumalanga, property values have remained stagnant since 2019, while in most other provinces, they have declined.

Despite these inflation-adjusted losses, the average price of a house in South Africa still requires a salary that exceeds the national average for formally employed non-agricultural workers.

How much you need to earn

According to Richard Gray, CEO of Harcourts South Africa, banks typically prefer lending to buyers whose monthly bond repayments do not exceed 30% of their gross monthly income.

This threshold helps ensure that homebuyers can manage their bond repayments without compromising their overall financial well-being.

Sticking to this rule of thumb also leaves room for additional payments that can reduce the final cost of the home loan over time.

Using this 30% guideline, BusinessTech calculated how much one would need to earn to afford the average house in each province.

The calculations are based on a 20-year home loan at an interest rate of 11.75%, using Absa’s bond calculator.

Property prices were sourced from Property24, which compiled data from over 190,000 property sales registered with the deeds office in 2024 so far.

The national average price for a home in South Africa is currently R972,200.

To afford a house at this price, an individual or household would need to earn roughly R35,120 per month.

This is R8,329 more than the average salary of R26,791 earned by formally employed non-agricultural workers in the country.

Unfortunately, this remains the case for all provinces, with the lowest average house price recorded in the Free State (R800,000).

This means you would need to earn R28,900 per month, which is still more than the average salary.

The salary requirement only increases from there, with the Western Cape being the most expensive province in the country.

The average price of homes in the Western Cape is R1.6 million, and a salary of just over R58,000 is required—almost double that needed in most provinces.

Source:  Businesstech.co.za