I'm a professional who earns a reasonable salary. It's above the industry average, and I'm pretty sure it's much higher than the median salary in South Africa. I have no debt, so I would have assumed that I'm in a fairly good financial position.
So, I was bored, and went on a few bank websites, to see what type of bond I could afford. I plugged in my gross monthly income, and I was shocked to discover that I would have trouble getting a bond for anything larger than a glorified matchbox.
According to this article the average middle income house costs R911 800, and Standard Bank's median house price is R580 0001. Both of which would be out of my reach.
I could rent, but, even that is quite pricey. If a landlord wanted a yield of 10% on a house, at the median value, he would need to charge R4 800 per month in rental. 2
Who can afford to get a bond on the "median house"? According to the article, households with a joint income of R20 000 per month. How many families have that kind of income?
I've heard from "experts" that the National Credit Act could make houses more affordable by cracking down on reckless lending by financial institutions. If the prices reflect a real housing shortage, then I'm pretty sure that shortage will be filled by the huge housing developments that are mushrooming around Gauteng (and I am sure the rest of South Africa as well). Either way, prices will have to drop or stabilise until incomes catch up. Until that happens I have a great deal sympathy for the civil servants who are going on strike. The middle classes are being hit very hard currently, and it's become difficult to afford to have a roof over one's head in South Africa, low official inflation rate or not. And if lower house prices make some speculators go bankrupt, thats just too bad.
Notes:
1 I don't know what they mean by "house", so that could be a hole in the argument.
2 I'm no economist, so forgive me if my terminology and figures are a bit off, but I think the general idea is correct. I also doubt that landlords are actually getting 10%.
Update: More hype about how house prices are going to go up.
