25 Sep 2012
Many South African citizens do not earn enough money to qualify for home loans to buy property and will have to rent for the rest of their lives.
This is according to Paul Henry, managing director of Rawson Developers who says South Africans, and indeed many people in the developed world, are entering a new era in which financial constraints make it more and more likely that they will be ‘locked out’ of the property market.
This is according to Paul Henry, Managing Director of Rawson Developers, who sayspoints out that young people in South Africa today do not earn enough to qualify for a bond.
“Since the introduction of the National Credit Act (NCA), they can all too easily fail on the scoring system that the banks now apply and this means they simply do not get bonds,” he says.
Henry says the situation is further complicated by low end income earners not qualifying for a bond at today’s low interest rates and when rates rise, the chances of them getting a bond will be reduced even further.
He points out that the result of this is that many people will have to rent all their lives, and says that even that can be difficult because rentals are now increasing at a very fast rate.
“This obviously suits property owners very well, and at Rawson Properties they are seeing a rise in buy-to-let investors in certain areas.
However, it is very definitely not in the interests of the man-in-the-street and does not augur well for future stability in South Africa,” he says.
Middle income earners in class South Africans who have traditionally always looked forward to owning their own homes now have to revise their expectations.
When asked to give examples of how tough conditions have become, Henry says that today, a husband and wife with a joint income of, say, R15 000 per month will be limited by the NCA ational Credit Act to paying R5 000 per month on their bond.
He says this would only purchase them a small, two bedroom home in a ‘very modest’ area priced at R500 000.
A married couple with two children looking to rent (not buy) a simple three bedroom home in an area like Parklands, Plumstead or Brackenfell, which are generally considered to be fairly inexpensive, would have to find at least R7 000 per month to cover the rent. Or they would have to accept the fact that their children will be raised in an apartment, quite possibly without any garden to play in.
Henry says this situation is even more serious for those in the lowerst income groups.
As a result of conditions today, more and more children will be forced to live with their families even after getting married, says Henry.
Michael Feltsman, the Rawson Properties franchisee for Mitchells Plain, estimates that over 40 percent of families there now, have either grown up children or lodgers living with them.
This situation is not confined to South Africa as 70 opercent of Germans now also accept that they will probably rent all their lives.
Henry says a partial solution is, for those young people who are fortunate enough to own houses, to accept that they may never become empty-nesters and therefore they should extend or adapt their homes to make them suitable for dual living.
House for sale in Eden Glen Ext 18 R 3 300 000
House for sale in Groenkloof R 2 650 000
House for sale in Kabega Park R 549 000
House for sale in Bedfordview R 2 900 000
House for sale in Eastleigh Ridge R 2 600 000
House for sale in Rustenburg R 1 395 000
House for sale in Hurlyvale R 1 900 000
House for sale in Brackendowns R 1 390 000
House for sale in Eastleigh R 2 380 000
House for sale in Annlin R 1 299 000
If you are using Internet Explorer 8 or higher, please verify that your Internet Explorer compatibility view settings are not enabled.
For the best browsing experience, update to the latest Version of Internet Explorer or try out Google Chrome or Mozilla Firefox.
Please contact our Property24 Support Team for further assistance. Tel. +27 (0)861 111 724