SA homes affordability deteriorates

Prices of average-priced homes have climbed beyond an average person’s means, but the number of people that can afford them has increased, a property strategist said.

"This is a somewhat different story to what many seem to believe, i.e. that less and less people are able to afford houses," said John Loos, a property strategist at FNB.

Over the past ten years, average house price inflation measured a staggering cumulative 355% but the house price/remuneration ratio rose by a modest 96% and the repayment/remuneration ratio rose only 26%.

Loos said the fact that an average person’s income growth had not kept up with house prices - while middle-class numbers have grown - suggested the market was in need of some correction.

But prices were unlikely to correct downward during these times due to urban land supply constraints and the steady growth in middle-class numbers, Loos said.

"Rather, urban densification, in the form of house size and stand size adjustments, seems the far more likely route," he said.

Loos noted that this year, the number of new average homes completed had declined.

"This implies that households on average will continue to pay more for housing in future, but that the rate of increase will be curbed by having them pay ’more money for less house’," Loos said.

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