Millinnials setting good example for the 2000s
Millennials in South African have purchased homes in great numbers in recent years. According to statistics supplied by property group Lightstone; almost 330 000 millennials bought homes in South Africa between 2015 and 2017 and 70% of them were first-time homebuyers.
Millennials, or the Generation Y, are between the ages of 22 and 37 and were born between 1981 and 1996.
In recent years, the global trend has been that millennials have become a significant share of homebuyers. The National Association of Realtors statistics show that 34% of homebuyers in the US in 2017 were millennials, with as much as 66% of these being first-time homebuyers.
“For most people buying their first home can be a daunting prospect. It is often the single biggest investment they will ever make, and it means a long-term commitment. Buying property is an emotional decision for many, which can be filled with a lot of anxiety and excitement. While millennials may face a number of financial and other barriers entering the property market, statistics show that a fair number of our young people are buying homes,” says Nondumiso Ncapai, Head Customer Strategy & Engagement at Absa Home Loans.
The Lightstone data also showed that 39.1% of the 330 000 millennials who bought homes in 2015-17, were buying in the R250 000 to R700 000 price category; with 36.1% buying homes in the price bracket of R700 000 to R1.5 million. This implies that more than 75% of millennials bought homes starting at R250 000 up to a value of R1.5 million in the three-year period. Almost 14% of millennial homebuyers bought homes right at the lower end of the market; i.e. homes of less than R250 000, with 10.8% of millennials who bought homes at the upper end of the market, i.e. those with a value of R1.5 to R3 million and more in 2015-17.
Interestingly, a fair share of the millennial demographic were repeat homebuyers.
“Although most millennial homebuyers were first-time buyers in 2015-17; as much as 30.2%, or almost 100 000 of them, were repeat homebuyers during this period. This was most probably the result of changing financial and/or family and lifestyle conditions,” says Ncapai.
In terms of the type of properties bought by millennials, most of them (60%) purchased sectional title properties in 2015-17; most likely due to lifestyle and financial reasons. A total of 27% of millennials preferred to buy freehold properties; while 13% of them bought homes in lifestyle estates during this period.
A significant number (35,9%) of millennial homebuyers in 2015-17 were living in some of the country’s major metropolitan areas. Most of them were based in Gauteng in Pretoria and greater Johannesburg, followed by Cape Town, Durban and Port Elizabeth.
“It makes sense that the majority of millennial homeowners are based in Gauteng as it is the economic hub of the country. Even in Gauteng the areas which are the most popular among millennials are the ones which see relatively high levels of economic activity,” says Ncapai.
Ncapai also has some advice for young people thinking of purchasing their first home:
- Be fully aware of your financial position and prospects; while saving as much as you can for a deposit on a property. The bigger your deposit, the smaller the capital amount you will need to borrow from the bank; which will have a major effect on the monthly mortgage bond repayment.
- If you can afford it, pay extra capital amounts and/or extra funds into your monthly mortgage bond; over and above the required minimum amount. By doing this you will not only shorten the period of your bond, but you will also pay less interest on your loan.
- Shop around and look for properties in different areas, including areas which are undergoing a revival. You might initially be moving into a slightly unpopular neighbourhood; while paying a relatively low and an affordable price, but the neighbourhood could be a popular and sought-after suburb in a few years’ time; which will be reflected in increased property values.
“Being a young homeowner can be both exciting and daunting; but if you save for a deposit, do your research about neighbourhoods, property types and prices, it can eventually be a very rewarding experience; one that could benefit your financial position and end up ensuring future stability for you and your family,” Ncapai says.