South Africa's housing crisis: over 80% of households unable to afford local properties

IOL News

2 days ago

South Africa contends with a housing affordability crisis.
Image: Rob McGaffin
An overwhelming majority of South African households are currently priced out of the local property market, and this trend is worsening.
'There's something very wrong if such a large demand is not being met and, although the problem is well known in the property industry, no real solutions are forthcoming from the government actors who are responsible for solving these problems,' says Renier Kriek, managing director of innovative home finance provider, Sentinel Homes.
He says the root causes are mainly systemic and need to be addressed by the government. It is simply not acceptable that the country has added close to 20 million inhabitants in SA, but the economy has managed to produce a mere 1.9 million homes.
In its June 2025 Property Newsletter, automotive and property data provider Lightstone reports that only one formal house exists per 3.3 families, who earn less than R26 000 per month. This accounts for more than 80% of South African households.
Sentinel Homes said not only are there not enough houses, but new developments are victims of rising construction costs, making each generation of property less affordable to consumers than previously.
The home finance provider said property prices have been outpacing wage increases for the past 70 years, not only in SA but in most of the world.
Earlier this year, this publication reported that the take-home pay of only 15.8% of South Africans would be sufficient to be able to afford a property of R1.3 million in value.
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Following last year's BankservAfrica Take-Home Pay Index (BTPI), Elize Kruger, an independent economist, said according to the calculations of an estate agent, for a salary earner to afford a property of R1.3 million in value, with a repayment of R13 480 per month over 20 years, based on the prime rate of 11%, the gross income per month of such a salaried person must be R40 000.
She said that, assuming an effective tax rate of 23.1% (for an annual income of R480 000), that translates into a net salary/take-home pay (after income tax) of approximately R30 000.
Kruger said these numbers are based on a single income per household, so when assuming that two incomes are used to finance a property.
Add to this trend, Sentinel said South Africa's flaccid economic growth, resulting in low job creation and low wage growth, made it easy to see why affording a home is becoming harder and harder for low to middle-income earners.
Data analysed by Lightstone showed that there was one property for 4.8 households earning under R13 000 a month.
The ratio improved to 3.3 households for every one formal property if the salary threshold moved to R26 000 a month, said Hayley Ivins-Downes, the managing executive for real estate at Lightstone Property.
For higher income groups, this ratio was closer to 1.2 to 1.
The property market intelligence provider said there were nearly 12 million households earning less than R13 000 a month, with just under 2.5 million properties available if households stuck to the guideline that they spend no more than a third of their income on housing.
Kriek said that certain things need to change outside the property market before problems can be tackled from within, says Kriek.
He said South Africa sorely needs economic growth driven by a consistent economic policy. Not only graft but also mismanagement of state and parastatal finances needs to stop.
'For example, paying CEOs of dysfunctional utilities more than the Prime Minister of the UK is wasteful and robs citizens of funds that could go towards housing,' says Kriek.
He said the country needs structural reform that embraces deregulation, labour market reforms, trade liberalisation, privatisation or public-private partnerships, and tax reforms to encourage infrastructure investment.
This may also require currency devaluation, which is a difficult political proposition and is unlikely to be popular with richer consumers.
The MD lamented the fact that artisans are retiring faster than they can be replaced, which puts upward pressure on housing production costs. Most of South Africa's workforce is not well-suited to its services-oriented economy.
It needs to reindustrialise to create jobs for the skills we have, encouraging technical trades, such as plumbers or electricians.
He added that the country's restrictive labour policies make labour much more expensive than in competing economies, such as Bangladesh or Sri-Lankha. This could be resolved by devaluing the currency or reducing imports, or simply by liberalising labour laws.
That might mean workers are paid less, but that more people will have jobs as a way of creating an economy that works for all – and this would be a temporary situation that will correct itself as more jobs are created.
'Making such changes at a national level will ensure that problems in the property market are not intractable,' says Kriek. 'But these necessary reforms will also go a long way toward rejigging the economy generally for the better.'
Inside the property market, Kriek said several problems are making housing construction more costly and therefore less affordable when properties are sold.
He said this was bureaucratic sprawl, NIMBYism (Not In My Back Yard), fixed charges, small unit avoidance, slow land release, lender and landlord protection.
Sentinel said if 80% of South Africans cannot afford a home, and developers are unwilling to meet the demand, something is terribly wrong. It said this was not an innovation or economic problem but a systemic one that the government needs to rectify. The problem is market design, and that is something for which we rely on government, and for which the political will must exist to take some tough decisions, he said.
'The private sector is profit-driven and the demand clearly exists, so it's up to the government to create the incentives and ease the restrictions that prevent the private sector from earning its bread in the provision of affordable housing,' says Kriek.
'There's more than enough money floating around – government just needs to create a market that provides incentives for the available resources to flow to where the demand already exists.'
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