Affordability Squeeze: Homes vs Consumer spending

• Home affordability isn’t just about prices, rising operating costs and lifestyle spending are reshaping buyer capacity.
• Mortgage affordability is stable vs the 1990s, but utility and service costs are eroding real affordability.
• Consumer goods and services are increasingly competing with housing for a share of household income.

More than just house prices‍

The conversation around home affordability is often oversimplified.
It tends to focus on rising house prices and interest rates, but that’s only part of the story.

According to John Loos independent economist, the real pressure on affordability today is far broader. It’s not just about what homes cost, it’s about everything else competing for a household’s income.

Homeownership must now compete with:

• Rising operating costs
• Lifestyle expectations
• A growing list of “essential” consumer products

This shift is fundamentally changing how, and whether, people can afford to buy property.

Average home buying affordability trends

‍At face value, property appears less affordable today. Since 1990: 

• House prices have grown significantly faster than disposable income
• The price-to-income ratio has worsened for cash buyers

But that’s only one side of the story. For credit-dependent buyers, the majority of the market, the picture is more nuanced. Lower interest rates have offset rising prices:

• In the 1990s, interest rates often exceeded 20%
• In recent cycles, they peaked around 11.75%

This means that bond repayments relative to income are not dramatically worse than in the past. In simple terms:

• Property is more expensive
• But financing it is comparatively easier

However, this doesn’t automatically translate into better affordability.

The Real Pressure: Home operating costs‍

The biggest affordability shift has come from running a home, not buying one. Since around 2008, key cost drivers have surged: 

• Electricity tariffs rising well above inflation
• Municipal rates and water costs climbing steadily
• Maintenance and service costs increasing

These costs have outpaced both:

• General inflation
• Household income growth

The result?

Even if buyers can afford the bond, the total cost of ownership is becoming harder to sustain. There’s also a hidden layer:

• Backup power systems
• Water storage solutions
• Security and maintenance upgrades

These are no longer luxuries, they are becoming necessities in many areas.

The Silent Competitor: Consumer spending‍

Perhaps the most overlooked factor in home affordability is competition. Not from other buyers, but from consumer goods and services.

Loos highlights a fundamental shift: Today’s households face an explosion of spending options that didn’t exist decades ago.

Key spending categories competing with housing

• Clothing and footwear (+612% real growth)
• Communication (mobile, data, devices) (+490%)
• Health and medical services (+251%)
• Recreation, entertainment and lifestyle (+253%)
• Transport and mobility
• Restaurants and hospitality
• Education
• Household goods and appliances
• Miscellaneous services

Many of these have evolved from luxuries into perceived necessities.
 At the same time:

• Their relative affordability has improved
• Their availability has increased dramatically

So while they may be cheaper individually, collectively they are consuming a larger share of income. 

This creates a critical shift: Housing is no longer just competing with inflation, it’s competing with lifestyle.

The affordability equation has changed‍

Historically: 

• Limited consumer choice
• Fewer financial distractions
• Greater focus on asset accumulation

Today:

• More spending options
• Higher lifestyle expectations
• Greater pressure on disposable income

Even though housing costs have not worsened dramatically in isolation, the competition for income has intensified significantly.

A new reality for buyers

South Africa’s housing affordability challenge is more complex than it appears. It’s not just about:

• House prices
• Interest rates

It’s about:

• Rising operating costs
• Structural cost increases in utilities
• A rapidly expanding consumer economy

The result is a squeeze from both sides:

• Fixed costs are rising
• Discretionary spending is expanding

For buyers, this means one thing: Affordability is no longer a single calculation, it’s a lifestyle decision.

The way forward:

• Reassess spending priorities
• Factor in full ownership costs
• Build financial buffers
• Focus on long-term sustainability

‍

Because in today’s market, the real question isn’t just: “Can you afford the house?” It’s: “Can you afford everything else that comes with it?”

‍