Average house price forecast to reach R73.2m
ANYONE involved in real estate will tell you that the best time to buy property is now.
Back in 2011, Werner Scheffer, customer relations manager for Multi Spectrum Property (MSP), drove this point home by showing that property prices had historically grown at an average rate of 11.25% per annum since 1966 (when the average price for a home in South Africa was R9 516).
In 2011, 45 years down the line, the average house price was just over R1 million.
“If this trend continues until 2050, the average house in South Africa will cost R73.2m. If we were to cut this trend by half, then the average house will still cost R36.6m,” says Scheffer.
MSP took another look at house price growth, to see whether we were still set for that R73.2m price tag in 2050.
“We have 50 full years of house price growth to analyse, and if you look at what has happened over the past five years – especially in the Western Cape – we are still firmly on track to see those mad prices in 2050,” says Scheffer.
“While no one has a crystal ball to see exactly what might happen in future – and there are various factors that might play a role – if the past 50 years of statistics are anything to go by, the property market is in for a very interesting ride.
“Property remains an investment vehicle which can realise remarkable returns. It is an asset class that outperforms many other investments over time as it answers a basic human need, namely shelter.
“If we look at bond repayments on that average priced home of R73.2m in 2050, it equates to a monthly instalment of R730 536 at the current prime interest rate and calculated over a 20-year term. What is more frightening is that you will need to earn a monthly salary of R2 435 120 to qualify for that amount.
“This is only in 33 years’ time – but if my salary only increases annually by roughly 7.5%, what should I earn today to be able to buy that average home in 2050? It works out to almost R225 000 per month.”
MSP CEO Riaan Roos says for the average South African, even if they want to get into the housing market as soon as they can, this has been marred by a lack of quality yet affordable residential projects and financing. “As percentages on yearon-year growth show, affordability is getting worse for those looking to buy, and especially for first-time homebuyers.”
Scheffer says: “When is the best time to buy property is similar to the question about when is the best time to plant a tree. The answer remains ‘yesterday’ – and if not yet done, then today.
“The rate at which properties have grown has surpassed the rate at which our salaries grow annually, and this gap will continue to get bigger. Failure to make all efforts to buy as soon as possible may leave you stuck in a ‘rental trap’, where it will become almost impossible for the average South African to enter the property market.”