Buying a house in South Africa getting more expensive

Buying a house in South Africa is becoming more challenging for average salary earners as the monthly repayments constitute a higher percentage of their salary.

This was revealed by a Daily Investor analysis of the change in house bond repayments over the last two decades.

The monthly repayment of a property is set by two factors – the loan’s size, which is determined by the value of the property, and the interest rate on the loan.

The average residential property value grew by an annualised compounded growth rate of 8.27% since 2001.

The average interest rate level was much higher in the early 2000s than experienced in the past decade. This means the cost of financing a house is much lower now.

The latest quarterly report by Ooba shows that the average house in South Africa currently costs R1,427,889.

If the owner obtained a home loan at the current prime rate of 11.75%, repayable over 20 years, the monthly payment would be R15,545.

To see how this monthly repayment compares with previous years, Daily Investor used the FNB residential house price index.

The value of the average house today was used and discounted back at the FNB index growth rate to determine the value of this “average” house in previous years.

The corresponding prime rate was then applied to calculate a specific monthly repayment for every scenario.

The average house price in 2001 was R249,824, and the prime rate was 15.25%. The monthly repayment would have been R3,336 when the house was purchased.

By 2013, the value of the same house increased to R921,721. It would have been financed at a prime rate of 8.5% with a monthly repayment of R7,999.

Five years later, the price increased to R1,213,055, and the prime rate increased to 10.25%. The monthly repayment of the house was R11,908.

However, the monthly repayments only tell part of the story. The average salary in South Africa should be considered to understand house affordability.

BankservAfrica’s Take-home Pay Index showed that the average take-home salary in South Africa increased from R12,573 in February 2018 to R15,438 in February 2023.

This means the average monthly house repayment was lower than the average take-home pay in 2018.

Fast forward five years, and the average monthly house repayment now exceeds the average take-home pay.

This means it is more difficult for the average South African to afford a house than five years ago.

House price repayments over the last 22 years

The table below shows how the monthly repayment for an average house in South Africa changed over the last 22 years.

Measure	2001	2013	2018	2023
House price	R249,824.39	R921,721.19	R1,213,055.05	R1,434,448.00
Prime rate	15.25%	8.50%	10.25%	11.75%
Repayment period	20 years	20 years	20 years	20 years
Monthly repayment	R3,335.90	R7,998.91	R11,907.87	R15,545.21