There is a seismic shift in the residential property market, much of which is attributable to the upsurge in demand from the Millennial generation, who for the past five consecutive years have represented the largest share of the home buying market.
Late to home buying compared to previous generations – with many either living at home or renting, although it might seem that homeownership has not been a priority for this generation, it appears likely that this trend has changed due to the current and prevailing low interest rates. Affordability is most probably the game-changer, coupled with the fact that many of them now have children ie families of their own. Until recently, the barrier to entry to the property market has been high for this generation while it was relatively easier for the previous generation.
With wages relatively stagnant over the past 15 years – except in regard to the public sector – the cost of living has skyrocketed. Internationally, during this period, Millennials have faced lower interest rates but higher debt – including student loans and credit card debt. As a result of generally stagnant wages, Millennials have struggled to save up for a deposit – making home ownership more or less out of reach, until around mid-2018 when 100% loans became more readily available.
First-time home buyers – including Millennials – are also taking advantage of the cheaper finance to acquire more expensive properties, with this cohort accounting for almost 50.95% of home loans during the fourth quarter of 2020, according to the bond originator ooba. As we have noted previously, South Africa’s young population, with nearly two-thirds of citizens currently below the average age of a first-time buyer (34 years), provides the market with a solid underpinning.
The lockdown also appears to have prompted some Millennials (from Generation Y – born from 1980 to 1995) to begin putting down roots, starting a family of their own and buying their first home, taking advantage of low interest rates. While this sector was said to remain mobile, maintaining flexibility to travel globally, the confines of lockdown is seeing many with young families taking advantage of the near-historic low interest rates acquiring freehold homes with outdoor space in more affordable, peripheral areas or suburbs – especially as in many instances they can now work from home, instead of needing to be in the hub of central cities. However, they can also still be found renting or buying sectional title apartments in urban growth nodes, particularly in mixed-use developments which offer the convenience of on-site gyms, eateries and retail, as well as shared work space.
In Umhlanga New Town Centre, a new development called The Onyx offers New-York-style 1 bed apartments from R1,3 million and unique 2 bed loft apartments from R2,5 million. The development targets Millenials and first-time home buyers and is in close proximity to Gateway Theatre of Shopping, two private hospitals, a cluster of restaurants and coffee shops and of course, Umhlanga’s golden beaches.
If there is a renewed wave of conversions of commercial property to well-located residential sectional title units in relatively affordable and accessible price bands, this would provide good investment opportunities, resulting in an influx of homeowners or tenants to business nodes – quite possibly leaning towards Millennials, including younger and less affluent buyers. While many Millennials aspire to living in a central node or live/work/play environment, others are looking further afield to somewhat more spacious freehold properties in secondary towns, or semigrating to coastal and other desirable outlying and affordable areas for a better lifestyle for their families, yet with access to good schooling and all amenities.
We also find that Millennials seek homes which cater for their specific lifestyle needs and values, for example, tranquil spaces for quiet relaxation, exercise, yoga or meditation; larger kitchens and living spaces where the family has room to ‘breathe’ if confined due to lockdown restrictions; open spaces for walking, hiking or mountain biking – such as those found on secure lifestyle estates; and an eco-friendly environment.
With the interest rate expected to remain stable for at least the next year or so, it is likely that we will see this trend continuing as Millennials establish their foothold in the residential property market.