Millennials are taking advantage of the lower interest rate and doing it for themselves, writes Gareth Bailey.
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.
Being late to buy their first home compared to previous generations – with many either living at home or renting, although it seems that home ownership has not been a priority for this generation – it appears 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 a family of their own.
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, millennials have struggled to save for a deposit – making homeownership 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 lending rates 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 previously noted, 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 to start putting down roots, starting a family of their own, and buying their first home while 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 and acquiring freehold homes with outdoor space in more affordable, peripheral areas or suburbs – especially as many are now able to 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 – The Onyx – offers New York-style one-bed apartments from R1,3-million and unique two-bed loft apartments from R2,5-million. The development which targets millennials and first-time home buyers, is close 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 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 necessary amenities.
Millennials are also seeking homes that cater for their specific lifestyle needs and values – 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, we are likely to see this trend continuing as millennials establish their foothold in the residential property market.