Property Owning a home is out of reach for many South Africans, even more so if you are single and trying to get a bond on one salary.
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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, says an independent economist following the latest 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.
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 about R30 000, Kruger said.
In response to an Independent Media Property enquiry, Kruger said these numbers are based on a single income per household, so when assuming that two incomes be used to finance a property the ratio of salary earners that would be able to afford their own property would be higher.
Last month, the Department of Human Settlements told this publication that South Africa faces challenges with the housing accessibility opportunities for the gap market. It said the gap market pressures are felt more strongly in metropolitan municipalities, intermediate cities, and small towns. The department called on all stakeholders in the value chain to find long lasting solutions to this challenge since the gap market challenges drive the proliferation of informal settlements.
According to data by the Centre for Affordable Housing Finance in Africa, 2024, In 2023, the South African housing market comprised 6.91 million properties, with 76% of these valued at less than R1.2 million and two-thirds priced at R900 000 or less.
The BTPI is calculated on a monthly basis by dividing the total value of salaries paid into the bank accounts of employees (excluding salaries greater than R100 000 per month) by the total number of salary payments.
The payment clearing-house measures salary payments that are loaded onto the National Payment System (NPS) and paid by an EFT message that gets processed via their systems.
These take-home payments typically exclude UIF contributions, as well as personal income tax and employee pension payments (a portion of medical insurance premiums and even debt repayments could be subtracted before earnings are paid into an employee’s bank account).
The BTPI reflects the trend in almost 4 million monthly salary payments, which represents about 37% of all non-farm employees (or formal sector) in the South African labour market or 25% of the broader workforce that includes the informal sector and employees in the agricultural and household sectors. The BTPI is published as a smoothed seasonally adjusted index, with the year 2013 as base year.
Kruger said after three really dismal years in which salary earners fell behind, with salary increases not keeping up with inflation, placing purchasing power under pressure, 2024 turned out to be a better year.
She said the average nominal take-home pay reflected in the BTPI increased by 7.9% in 2024, a significant improvement showing the highest increase in years.
However, it is necessary to point out that a low base comparison has also played a role in this realised increase as 2023 and 2022 were both dismal years for take-home pay. With inflation moderating notably during 2024, salary earners have been better off in real terms than in any of the previous three years,” Kruger said.
She said that in real terms, take-home pay also tracked higher at R14 887 in December 2024, a notable 8.7% up on year-ago levels.
“The significant moderation in consumer inflation during 2024 has had a positive impact on the purchasing power of salary earners. Headline CPI averaged at 4.4% in 2024, the lowest annual rate since 2020 (6.0% in 2023). For 2024, real take-home pay averaged at R14 292, up by 3.1% in 2024. This was the first real increase in take-home pay since 2020.”
Looking ahead to 2025, Kruger said the economic outlook suggests that the salary improvements seen in 2024 could continue to gain momentum.
She said on the economic front, real GDP growth is forecast to increase by 1.7% in 2025, somewhat higher than in 2024.
“The acceleration in growth will be driven by a combination of improved household consumption expenditure, higher fixed investment spending, and further advances in structural reforms.
On the latter, an ongoing focus on improving South Africa’s electricity generation capacity, addressing supply chain blockages relating to freight rail and port operations, and upgrading water infrastructure are much- needed actions to propel the economy forward.
The anticipated improvement in the business environment is expected to enable companies to offer more substantial salary increases in 2025,” Kruger said.