South Africa house hunters face worst affordability crisis in decades – realestate.com.au

By all measures, housing affordability is at its worst ever.

That’s the damning revelation from PropTrack’s 2025 Housing Affordability Report, released today.

According to the report, households across the income distribution can afford less housing than this time last year, when the situation was already quite dire.

The result of this is that South Australia is now the second least affordable state in the Lucky Country, behind only New South Wales.

In what will likely come as no surprise to South Australians in the grip of a cost-of-living crisis, a middle-income household (earning almost $97,000) could afford to buy just 10 per cent of all homes sold in the 2024-2025 financial year without putting themselves in financial difficulty.

This means that they do not spend more than 30 percent of their income on mortgage repayments.

The result was even more dire for those already struggling to make ends meet, with households in the 30th percentile by income able to afford less than 5 percent of all homes sold during that period.

You’d think that income-earning families in the 80th percentile would be able to buy 80 percent of that stock pool, right?

In reality, these high earners could afford just over 60 percent of that, highlighting the growing inequality between house prices and wages.

It’s getting worse.

Mortgage payments for a median-priced home are now 40 percent of the median household income in June, having reached a record high of 41 percent in March – the highest in history.

In Sydney it is just under 38 percent of the average income.

Angus Moore, senior economist at REA Group. Delivered

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Report author Angus Moore, senior economist at REA Group, said the wage gaps between states were particularly evident when looking at South Australia.

“Adelaide, like Brisbane and Perth, has seen tremendous growth in house prices,” he said.

“Over the past five years, house prices have essentially doubled.

“That means the cost of servicing a mortgage is clearly much higher than it used to be, and that’s coupled with the fact that South Australia is a lower income state than New South Wales, Victoria, Queensland and WA.

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“That makes any house price much less affordable for a middle-income household, which earns about $97,000 a year in South Australia, compared to, say, Victoria, which is $120,000.

“There is a reasonable gap there and that means the cost of servicing a mortgage in South Australia is very high compared to the history of the country, and even compared to other states.

“This rapid growth in house prices has not been matched by growth in incomes, which is true for all states, but perhaps particularly challenging for South Australia.”

As hard as all of that is for homeowners, it’s even worse for house hunters.

Today, it takes a median-income household 7.2 years to save a 20 percent down payment on a median-priced home.

This is at a time when most of them would be paying record high rents.

Homeowners in South Africa are feeling the pressure. Photo: Stephen Brookes

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But Moore said house price growth could slow over the next 12 months, albeit not immediately, due to pressure from low inventory availability.

“South Australia, like New South Wales, typically sees more people moving than moving in, but that has not been the case during the pandemic,” he said.

“We saw a lot of people moving to South Australia, which clearly drove significant demand for housing, and this is a big part of the story as to why we’ve seen such a strong increase in house prices.

“That’s starting to fade.

“We are not seeing as strong interstate migration into South Australia as we did three or four years ago.

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“So, like affordability, we expect this to dampen the pace of house price growth.”

The report comes after another earlier this month which showed more South African buyers were in mortgage stress than ever before, with all the negative consequences that entails.

Data scientist and banking analyst Martin North of Digital Finance Analytics said fast-growing suburbs had the highest stress levels, defined by cash flow, due to a concentration of first-time buyers, especially first-time buyers, plus house and land packages that tend to have high loan-to-value ratios.

“Stress shows that households are under pressure on cash flow, so they cut back on spending and continue to withdraw, leading to lower economic activity,” he said.

CEO and founder of Digital Finance Analytics Martin North. Photo: Hollie Adams/The Australian

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“If this continues, some people will eventually default on their mortgages, but this process takes a long time, and banks are trying to ‘extend and pretend’ by extending loan terms or offering interest only.

“It also means more people getting more jobs, more social pressure and ultimately more crime and domestic violence.

“Rent stress is much worse than mortgage stress.

“This is the bigger immediate problem given the low rental supply and rising rents.”

– with Tim McIntyre