{"id":773066,"date":"2024-05-25T17:00:00","date_gmt":"2024-05-25T15:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=773066"},"modified":"2024-05-24T15:22:52","modified_gmt":"2024-05-24T13:22:52","slug":"the-houses-you-can-afford-on-the-average-salary-in-south-africa-3","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/property\/773066\/the-houses-you-can-afford-on-the-average-salary-in-south-africa-3\/","title":{"rendered":"The houses you can afford on the average salary in South Africa"},"content":{"rendered":"\n

Currently, the average monthly salary in South Africa stands at R26,894. Based on the recommended bond threshold by banks, this allows an average earner to afford a home valued at between R700,000 and R1,400,000\u2014depending on the number of earners per household.<\/p>\n\n\n\n

According to the latest quarterly employment survey (QES) published by Stats SA, the average monthly earnings increased by 1.6% from R26,471 in August 2023 to R26,894 in November.<\/p>\n\n\n\n

On a year-to-year basis, the average monthly earnings paid to employees in the formal non-agricultural sector increased by 2.3% from R26,298 in November 2022.<\/p>\n\n\n\n

This was largely due to increases in industries such as trade, business services, manufacturing, construction, transport, mining, and electricity industries. <\/p>\n\n\n\n

While defining who qualifies as \u2018middle class\u2019<\/a> is challenging in South Africa, Discovery Bank highlights in its SpendTrend 2024 report that mass affluent (middle-income) individuals are those who earn between R100,000 and R350,000 a year.<\/p>\n\n\n\n

This works out to between R8,000 to R29,000 per month, which is in line with the South African Reserve Bank\u2019s (SARB) estimated range of the South African middle class.<\/p>\n\n\n\n

Averaging out the estimates presented by multiple sources, the middle class in South Africa can be regarded as those who earn an income of roughly just above R20,000 per month.<\/p>\n\n\n\n

This would mean that the average formally employed non-agricultural worker in the country fits easily into the upper end of the middle-class category.<\/p>\n\n\n\n

The houses you can afford<\/strong><\/p>\n\n\n\n

According to Richard Gray, CEO of Harcourts South Africa, banks clearly prefer lending to home buyers whose monthly bond cost is no more than 30% of their single or joint gross monthly income.<\/p>\n\n\n\n

This 30% income threshold for home loans has been a common measure of loan affordability among South African banks. <\/p>\n\n\n\n

For instance, institutions like SA Homeloans have stated that they will not approve a home loan if the repayments exceed this percentage of a borrower\u2019s single or joint gross monthly income. <\/p>\n\n\n\n

Gray emphasised that adhering to the 30% guideline ensures that home buyers maintain a balanced financial portfolio, allowing room for other expenses and savings.<\/p>\n\n\n\n

Gray also noted that this threshold is important because it also leaves room for making additional monthly payments into a home loan account. <\/p>\n\n\n\n

This can significantly reduce the final cost of the home loan and decrease the payment period\u200b\u200b. <\/p>\n\n\n\n

Considering this, BusinessTech estimated the price of a property one or two individuals \u2013 assuming you have a partner \u2013 could afford on the average salary in South Africa. <\/p>\n\n\n\n

To calculate this, we used Absa\u2019s bond calculator<\/a>, assuming a 20-year home loan period at an interest rate of 11.75%.<\/p>\n\n\n\n

Based on these assumptions, the table below outlines the price and monthly bond repayment amount one or two individuals could afford on the average salary in South Africa.<\/p>\n\n\n\n

No. of earners per household<\/th>Gross monthly income<\/th>Max. property value<\/th>Monthly repayment amount<\/th><\/tr><\/thead>
One<\/td>R26 894<\/td>R745 000<\/td>R8 068<\/td><\/tr>
Two<\/td>R53 788<\/td>R1 490 000<\/td>R16 136<\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n

Using these figures, we then looked at various properties currently on the market at these price points in the Western Cape, Gauteng, and Kwa-Zulu Natal \u2013 to give you an idea of what you\u2019d be looking at.<\/p>\n\n\n\n

These property examples are listed below.<\/p>\n\n\n\n

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Western Cape<\/strong><\/p>\n\n\n\n

One income earner<\/strong><\/p>\n\n\n\n