The average home buyer in 2018 is 44 years old, six years older than in 1980 when the average home buyer was 38 years old. In South Africa the average middle-clas Millennial and younger Generation X’ers appear to be waiting longer to enter the property market.
In South Africa over the last couple of decades the fastest growth has been among home buyers in the older age groups. John Loos, household and property sector strategist with FNB says since 1980 the property buyer population younger than 30 years has declined almost by half, from 22.15% to 12.34%.
Interestingly, in the US the Millennials have grown their share of homeownership the most of any age group in the fourth quarter of 2017, from 34.7% in 2016 to 36%. The well-heeled section of this age group is expected to dominate the luxury market going forward according to a recent research by Luxury Portfolio International® and international market research company YouGov. They attribute the buying power of this group of high net worth individuals (HNWIs) to most inheriting or anticipating an inheritance of substantial wealth, but also having solid careers of their own.
In South Africa the picture looks very different. Most younger people have been feeling the effect of the weak economic performance of the last decade. The 30-39 year old age group saw their share of total home buying decline from a 37.61% high after the pre-2008 boom to 29.22% by April this year.
Loos says the younger age group are more sensitive to economic and interest rate shocks as was seen in 2008/9 when the economic recession hit and interest rates peaked at 15.5% by mid-2008. This caused greater numbers of younger buyers to sit and wait for better economic times, but the pre-2007 ‘glory days’ of 5% GDP growth never really returned.
In December 2007 the average age of individual property buyers was 40.69 years but by March 2009 this had risen to 43.6 years and after 2012 it continued to rise. From 2013 to 2017 the 20-24 year old age group saw its share of total home buying decline by 10.8% where-as the 25-29 year old cohort grew by only 1.6%.
Loos says after examining the growth patterns among the home buyer age groups over the past five years, he thinks it possible that the group in its 20s will see its share of total transactions decline even further.
On the other hand, South Africa’s ageing middle class population appear to be participating longer in the housing market, even years after the average retirement age of 60 or 65. The 50-58 year age group grew their share from 11.79% in 1980 to 19.34% by April 2018, the 60-69 year old cohort from 4.78% to 10.12% and the 70+ age group from 0.73% to 3.61%.
The boom in recent in years in the number of retirement or lifestyle villages built in South Africa probably has something to do with the rise in percentage share among the over 60’s section of the population. Our country has an ageing population and with many retirees opting to rather live out the reminder of their lives in a retirement village, developers have been scrambling to keep up with the demand.
Older repeat buyers also have far bigger financial buffers built up as well as having significant equity in the property they sell than do most aspirant younger buyers. In short, older home buyers are the more stable group when it comes to buying homes through the property and economic cycles, says Loos.
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IMAGE SOURCE: artofmolly.com
