Absa – Impact of household incomes on regional growth

News > news - 31 Oct 2005
Although the residential property market has performed strongly at national level during 2000 to 2004, noticeable differences in conditions and developments are evident at
regional level, according to Absa’s Residential Property Perspective for the Fourth Quarter 2005.

House prices have showed relatively strong growth in all the provinces and metropolitan regions over this period, but diversities in terms of growth in house prices and, especially, the level of and growth in household income during this period create a different impression of the state of the property market in the various the regions.

The potential size of the housing market in South Africa (as indicated by the number and percentage of households in a position to afford a house of 80m²+ in the so-called middle segment of the market) can be regarded as relatively small (about 1,8 million households, or 14,4% of a total number of 12 445 791 households in 2004, based on the above mentioned analysis). This was the result of a very skewed distribution of household income in the country, implying that a large percentage of households earned
relatively low levels of income.

In view of rapidly rising house prices in general during 2000 to 2004, the affordability of housing has become an increasingly important issue over this period. The ratio of
house prices to household income in South Africa was at a level of 4,5 in 2000. It increased to 7,2 in 2004 and rose to significantly higher levels in certain provinces.

This implies that housing in these provinces has become much less affordable than in provinces experiencing a relatively high level of house prices, together with a high
level of household income, such as Gauteng and the Western Cape. Another important reason for this development is that household income in most provinces has increased at a slow pace from relatively low levels compared with Gauteng and the Western Cape during the past five years.
Loading comments
share this article