Absa’s latest house price index shows that house prices are up by 15,2% compared with a year ago — that is double the rate of inflation and good news if you are seller. But for many buyers, it now means that becoming a first-time home owner is less affordable.
According to Absa’s figures, the average house price of a middle-segment home is now R1 081 400 after house prices increased by 8,8% above inflation.
But it is those buyers in the entry-level property market that face the steepest growth in prices. The average house price for a small home (80 square metres to 140 square metres) grew by a massive 29,9% over the last year. This brings the average price of a small home to R843 700. Considering that banks now want a deposit of 15%, one would need a R126 000 lump sum saved to buy a home.
Absa property economist Jacques du Toit says the increase in prices for smaller homes is all about affordability. As house prices have recovered, so the demand for less expensive homes has increased. But it is the ongoing affordability of running your home that is affecting buyer’s decisions. Rising property rates and taxes as well as electricity and water tariffs hikes are affecting the running costs of homes and people are looking to smaller homes to reduce these costs.
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