Whatshot
Property Talk
Property Talk
Date: 2016-04-01
Estimates of home running costs with respect to the main cost categories confronting home owners, such as Municipal Rates, Water and Electricity, and Repairs & Maintenance, are insightful to study in order to provide a clear overall picture of the impact on home ownership affordability. The Municipal Rates measure relative to disposable income has deteriorated (increased) by 34.97% since 2008. The Water component has increased by a more moderate 15,91%. The major upward pressure has come from the Electricity to disposable income measure, which has increased by 91.01% since 2008. With Eskom calling for additional above inflation tariff hikes we can expect this component remaining significant in our affordability measurements. By contrast, the measurement for Home Maintenance and Repairs relative to disposable income has actually declined (improved) by 4,9% since 2008.
When we consider competitor product affordability to housing, such as consumer goods and services, we begin to understand the relative price and affordability advantage consumer goods have enjoyed since 2001. By the 4th quarter of 2015 the average consumer price to disposable income ratio had dropped to 77.96 (from 100 as at the 1st quarter of 2001). By comparison the average priced home to disposable income ratio over the same period is 127.84. This means that relative to a wide range of consumer goods, housing is significantly less affordable.
Credit affordability is an important determining factor of home ownership and is a function of the value of credit outstanding, the level of disposable income and the prevailing interest rate. The Debt Service Ratio - the cost of servicing total household debt expressed as a percentage of disposable income is a great measure of credit affordability. This measurement indicates the same trend reversal since 2013 with an increase of 9,7% over the past two years.
Pressure on the affordability of home ownership is particularly good news for landlords, as more people will elect to rent rather than buy, when faced with affordability constraints.
For further information and an interactive analysis of this article follow my blog: andreaswassenaar.blogspot.com.
Andreas Wassenaar
Principal - Seeff Dolphin Coast
Cell: 082 837 9094