Kerry Dimmer
According to the 2022 census, there are 60.6 million inhabitants in South Africa. Once you exclude the 22 million under the age of 19 and the 6 million aged 80 years or older (rounded figures), we have some 32 600 000 paying consumers.
Breaking this down, using Trading Economics figures, we have 7,991,000 unemployed persons – which would likely take them out of the running for a residential property purchase. This means we have some 24,609 million potential buyers.
Here’s where it gets interesting. According to BankservAfrica’s Take-Home Pay Index (THPI), which derives its figures from salary payments made to approximately 3.4 million people (which it claims is 36% of the country’s workforce), the take-home pay average rose to R18,098 in January 2025 from R17,246 in December 2024.
IOL Property states that less than 16% of South Africans earn enough to afford a R1.3-million property, which requires a monthly repayment of R13,480 over 20 years at a prime rate of 11% and an income after taxes of R30,000 per month. It is, however, not clear where the home is situated. One also has to bear in mind that certain cities pay employees more than others. Effective 1 March this year, the minimum wage is now R28.79 an hour, which equates to an 8-hour day’s pay of R230.32, or R4,606.40 a month (8 hours a day x 20 days).
The one-third of income rule
Applying the rule of one-third of income towards a home loan means individual casual workers will only be able to contribute around R1500 a month towards the purchase of a home, and that doesn’t account for the rising cost of living either. This is one of the reasons why it has become popular for multi-generations to buy a home together, giving them more house and more options in terms of area choice.
Average salaries per city
The average income earned by residents in an area is also a driver of property values. For want of more recent statistics, we turn to the 2022 census, which indicated the average annual net salary by area. East London workers earn R296,429, followed by Johannesburg at R295 000, and Cape Town at R269 000. In descending order thereafter are the cities of Pretoria, Durban, Mbombela, Port Elizabeth, Kimberley and Pietermaritzburg, Vereeniging, Polokwane and Bloemfontein.
The question, therefore, is whether properties actually reflect the salaries of the majority of residents in an area. We asked some of the property agencies for a current listing using the following formula:
A standard free-standing, 3-bedroom, 2-bathroom home in a relatively well-maintained suburb, with parking facilities, garden, and in close proximity to infrastructure like good transport routes, schools, retail, medical and sports facilities. Note that this excludes estates.
We also asked them to include the monthly home loan repayment buyers can expect to pay for such a property without a deposit.
Pretoria – Mercy Mpungose (PPRE), eXp Realty South Africa, Gauteng & Pretoria:
- 3-bedroom in Akasia, on 1000 m² with 95m² under roof for R1 150 000
- Monthly repayment: R11 098,38
Cape Town – Mimi van Zyl, non-principal property practitioner, Rawson Properties Durbanville:
- 3-bedroom family home in Goedemoed, Durbanville, erf size 947 m² for R3 450 000.
- Monthly repayment: R35 610.
Mbombela – Sakkie van Rooyen, Pam Golding Properties area principal in Mbombela:
- A well-maintained, free-standing house on 600m² in the vibrant Steiltes community for R1 850 000.
- Monthly repayment: R19 095.
Gauteng – Louis Barbosa, of Harcourt’s Rhino, Roodepoort Gauteng:
- A spacious 3-bedroom, 2-bathroom home with a lock-up garage and three carports. Total building size of 210m² for R1,230,000.
- Monthly repayment: R12,696.
Durban – Sundhari Rangiah, Wakefields Berea:
- 3-bedroom in Sphiwe Zuma Road, Umbilo for R1,700 000.
- Monthly repayment: R17,547.20
The challenge
This suggests that affordability remains a significant challenge to homeownership. According to the Centre for Affordable Housing Finance (CAHF), there is a 2.2 million backlog for affordable homes, and the problem remains that the gap market is not catered for: they earn too much to qualify for an RDP house but too little to qualify for a home loan.
Renier Kriek, MD at Sentinel Homes, notes that 40% of consumers fall into the RDP housing category, characterised by household incomes of less than R3,500 per month. The gap market is the middle 30% of consumers where the supply of housing stock is extremely low and even declining despite massive demand. Kriek argues that a market design error is to blame for the high demand not being met. Adverse market design disincentivises the holders of capital from investing in affordable housing.
The biggest hurdle relates to the cumbersome and expensive processes that are associated with evictions and foreclosures. The cost of resetting the transaction (evicting or foreclosing) is prohibitive in South Africa and does not align with market circumstances, he says. South Africa should, thus, adjust its regulatory environment to favour private sector investment and the expansion of supply.
“We need to reduce the transaction cost for the holders of capital to take their chances on consumers who are not acceptable risks in the unduly high tenure security environment. In this way, some people will move into the formal housing market and fall out again, and perhaps more than once in their lifetime. If we go through enough of these cycles, eventually, everyone will be housed.”
Kriek admits that this solution may sound slightly callous and counterintuitive to the casual listener. “The alternative, retaining our restrictive policy environment, is even more callous and is currently barring people from ever getting the opportunity to enter the formal housing market. What use is being born free if you will never realise that constitutionally mandated right of access to adequate housing?”
