Welcome to the humble R73m home

THE average middle-class, suburban South African home will cost R73.2-million by the year 2050.

This is according to research compiled by Cape Town-based Multi Spectrum Property (MSP) Developments.

And, even more startling, the company's findings show that a potential home-buyer would have to earn R2.2-million a month just to qualify for the R73.2-million home loan.

The research has been provided to various experts in the residential property market and can also be accessed on the company's website.

But some leading property experts this week disputed the findings, labelling them "naïve" and "outrageous".

However, the company's data researcher, Werner Scheffer, said the figures were an indication of what could happen if the property market repeated the same run it had over the past 45 years.

"I am sure if I had told someone back in the 1960s that their property would be worth more than R1-million in 2011, they probably would have laughed and asked what I was smoking.

"But today the facts speak for themselves," he said.

Statistics and calculations provided by MSP, and supported by several property economists, show that while the average price for a middle-class house was R9516 in 1966, today it is just over R1-million.

According to the research, over this term, property prices historically grew at an average rate of 11.25% per annum.

"If this trend continues until 2050, then the average house in South Africa will cost R73.2-million. If we were to cut this trend by half, then the average house will still cost R36.6-million," said Scheffer.

He said monthly repayments on a R73.2-million home loan amounted to R660000, calculated at a prime interest rate of 9% over 20 years.

"Even more frightening is the fact that you will need to earn a salary of R2.2-million a month to qualify for this loan.

"And, if salaries were only to increase annually by an inflation rate of roughly 5%, then you would need to earn R330000 per month currently to be able to make that purchase of an average house in 2050."

Scheffer described the figures as "overwhelming and very scary".

Today R73.2-million can secure a 1486m², five-bedroom home in Cape Town's exclusive Bantry Bay, featuring four bathrooms, a studio, office, and large entertainment area with a swimming pool.

And a 105m² home in Cape Town's Kenilworth, advertised by Pam Golding Properties for R1-million, boasts three bedrooms and modest features.

Wakefields, one of KwaZulu-Natal's largest real estate agencies, said the research showed property was a good investment.

Chief executive Keith Wakefield said: "I don't think that in 1966 one would have thought that the price of an average home would be R1-million today.

"One good thing about this research is that it's a good indication that property is a good investment."

Property economist Professor Francois Viruly said the figures suggested that, over the next 45 years, property prices would rise by about 10% per annum.

"This is not unrealistic if the past performance of the property market is taken into consideration," he said.

"The bigger issue, however, is whether household income will keep up with the rise in property prices or not."

Viruly said affordability was influenced by a number of factors, including interest rates, the price of land, building costs and the ability of the market to supply sufficient residential units to meet demand.

First National Bank and the Pam Golding Property Group have disputed the research.

FNB's property market strategist John Loos said it was impossible for any company to predict average prices 40 years from now.

Pam Golding Property Group chief executive Andrew Golding argued that it would be naïve to attempt to forecast the average house price in 2050.

"As historical evidence shows, the property market experiences cycles and periods when house price growth has been static or even negative," he said.

Golding added that a number of factors impacted on the property market.

"It is doubtful if anyone can accurately forecast this," he said.