How Much Do I Need To Earn To Afford A 300k House – Demand for affordable housing has continued to grow in recent years in the real estate sector in Lagos and Nigeria as a whole due to a number of factors. First, it was attributed to the continued rise in housing prices (both rental and sale). For example, median home sales prices have grown…
Demand for affordable housing has continued to grow in recent years in the real estate sector in Lagos and Nigeria as a whole due to a number of factors. First, it was attributed to the continued rise in housing prices (both rental and sale). For example, average home sale prices have grown by up to 2.5% in Yaba and 9.4% in Victoria Island over the past 5 years.
How Much Do I Need To Earn To Afford A 300k House
Second, there was a corresponding increase in construction costs. Cement prices have seen an increase from between N2, 450 and N2, 510 in 2021 to N3, 900 – N4, 200 in 2022. In addition, land prices have increased with areas such as Epe recording over 100% growth and Lekki by 14% all in the last 5 years.
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While all these costs have led to an increase in housing prices, there has not been a corresponding increase in disposable income, making residential real estate unaffordable for the average Nigerian. In contrast, national disposable income contrasted by 2.52% in 2021 compared to 2020 figures.
According to paylab.com, people between the ages of 25 and 34 in Nigeria earn a monthly salary between ₦66,000 and ₦350,000 depending on the type of job. This translates to an annual salary between ₦792, 000 and ₦4, 200, 000. The average salary collected in this age bracket is NGN 191, 000/month while the median is ₦ 161, 000/month.
In this article, we highlight the impact of different wage levels in Lagos on overall rental affordability. We further highlight income level considerations for renting two bedroom apartments in various areas such as Ikoyi, Victoria Island and Epe in Lagos.
A number of general rules have been established to determine how much an individual should set aside for their rent based on their income. However, the most commonly used rule is the 30% rule proposed by the US Government in 1981. This rule proposes that a person must set aside no more than 30% of their monthly salary to pay their monthly rent or 30% of their annual salary to pay their annual rent.
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This means that any person or household that spends more than 30% of their salary on rent is “burdened”.
Another notable rule of thumb is the 50-30-20 rule proposed by Senator Elizabeth Warren and her daughter in the book: “All Your Worth: The Ultimate Lifetime Money Plan.” This rule of thumb divides income into 3 parts, namely: Basic Needs, Wants and Savings/Debt Payments. He recognizes that rent can exceed 30% and therefore sets a limit of 50% on all necessities, including bills such as rent, transport, food and other expenses. This allows flexibility in the budget.
Based on average income, areas like Ikoyi, Victoria Island and Lekki Phase 1 remain unaffordable for the average Lagosian.
In Lagos State, the prices of 2 bedroom apartments for example vary depending on the specific area being mentioned as well as the facilities and amenities available in the development. The map below shows the average rental prices for 2 bedroom apartments in areas we track in Lagos State.
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Based on the map above, it can be seen that Ikoyi and Victoria Island represent the highest price for a 2-bedroom apartment, averaging approximately ₦12,947,311/year. On the other hand, Epe and Ajah represent the lowest price with an average of about ₦584, 091/year.
Using the 30% rule, if an individual was staying in Ikoyi and paid an average rent of ₦12,947.311 per year, he would have to earn an annual salary of ₦43,157,703.3 per year. On the other hand, an individual renting a 2 bedroom apartment in Epe at an average price of ₦584,091/year s(he) would have to earn an annual salary of ₦1,946,970/year.
With average annual salaries ranging from ₦792,000 to ₦4,200,000, 83.33% of the areas we are tracking in Lagos would ideally be out of reach for the average Lagosian according to the 30% rule.
As such, we decided to conduct an online survey to understand current events and typical rental allocations for individuals in Lagos. According to our findings, the majority (43%) of respondents fall within the range of 11-20% of allocating their income to rent.
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Notably, while most allowances fall within the 30% mark, anecdotal evidence suggests that the rising cost of living means that individuals are still spending more than 50% of their salary on food, transport and other bills. With the increase in the inflation rate, the cost of food, transport and energy also increases, for example, diesel prices increased by up to 136% in the first half of 2022, resulting in an additional toll on citizens.
As such, alternative options such as cohabitation and suburban living have emerged as ways to defray the cost of rent, effectively reducing rent allowances for individuals. As a result, areas on the outskirts of Lagos are seeing increased interest, especially along the Lagos-Ogun state borders, being a cheaper location for people working in Lagos city centres. For example, places like Agbado, Arepo and Magboro saw a 30% increase in rents between December 2020 and April 2021.
On the other hand, anecdotal evidence from our online survey showed that about 15% of respondents were living with someone else.
In general, residents in Lagos are finding ways to make their lives cheaper and more comfortable by adopting living in more remote areas or living in cohabitation.
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We love your feedback! Let us know if you spend more than 30% on rent or more and if you have other sources of paying rent by emailing insights@ .
You can also subscribe to the Estate Intel platform to access a wide range of building projects as well as additional market data such as; sales rates, yields, supply drivers and information on key real estate market participants who are active in the market.
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How Much Do You Need To Earn To Afford A Two Bedroom In Nyc?
If you’re trying to set a budget for your first home, you may be wondering what you can really afford. Banks use certain lending criteria to decide how much they will lend you, but everyone’s financial situation is unique. To avoid mortgage stress, it’s especially important to make sure your mortgage payments are affordable for your lifestyle and manageable even if interest rates rise.
It’s also important to consider the long-term costs of home ownership, which include upfront costs such as stamp duty and moving charges, along with home maintenance, rates and taxes over time.
To avoid mortgage stress and still get your dream home, make sure your mortgage repayments are affordable for your lifestyle and manageable if interest rates rise.
Mortgage stress is defined as spending more than 30% of your pre-tax income on mortgage payments. Many buyers who bought in the past two years, when interest rates were at record lows, may now be facing mortgage stress as the mortgage repayment ratio has increased. However, that definition does not take into account your personal circumstances. For example, families with large overheads such as private school fees, car loans or child care will be less able to withstand increases than those with fewer demands on their money.
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In another view, high-income households have more flexibility about where their income goes and can cut back more easily. Dual-income couples may also be in a different tax situation than high-income households and enjoy more after-tax income.
Only you know your financial situation and what it can withstand. You can pay more than 30% without any problems or difficulties, even at a lower rate.
Let’s put this into perspective. CoreLogic data shows the median house price in metropolitan Melbourne on 31 December 2022 was $905,894 (or $752,777 across all homes, including units and apartments)
With a 20% deposit, your home loan would be $720,000. At an interest rate of 5%, over 30 years, your monthly payment would be $3,865.12. You can calculate similar figures here.
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You would need to earn at least $12,885 a month to avoid mortgage stress, which equates to a household income of $154,600.
Compare that to a house and land package that costs a more modest $700,000. With a 20% deposit of $140,000 you would need
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