A combination of factors is influencing Gen-Zers’ sentiment around property ownership.
A recent feature in The Economist suggests that Generation Z is “taking over.” It says that in the rich world, of some 250 million people born between 1997 and 2012, half are now employed. Other research reveals that this one-third of the global population has the fastest-growing disposable income, collectively expected to reach US$33 trillion over the next decade.
In South Africa, we have some 27.5 million Gen Zers (2021), also known as the ‘born-free, given their birth definition year is 1994 when South Africa moved into its democratic era. However, with stats indicating that youth unemployment has reached 45,5%, one has to wonder whether they will be able to afford property purchases in the future.
Currently, according to research provided by Lightstone, Gen-Zer’s property acquisitions are declining. In 2018, they bought 24 913 properties, and last year, this declined to 17 692. A deeper granular study reveals that their spending also declined from 2018’s R20,98-billion (rounded) to R18,722-billion (rounded). This is likely reflective of the higher interest rate cycle, with high unemployment also playing a significant role.
The situation may, however, be stabilising. Gen-Zers have consistently, since 2022, comprised 7% of the total buying volume and 6% since 2021 of the total property spend in the country.
There are three pertinent aspects that may or will come into play.
Housing deficits in Europe
The first is that Europe is experiencing a serious housing deficit. This may shift Gen-Zers’ focus towards buying in other global markets as they are nomadic workers. South Africa would be an appealing choice, given the currency exchange rate, making property purchases very affordable. This would be a real boost for the country’s economy from such foreign investment.
Residential real estate is the dominant contributor to the entire SA property market’s contribution to GDP, which is expected to reach a projected market volume of
US$0,86-trillion this year, says statista.com.
Inheritance
The second factor that will definitely impact sales volume is property inheritance. Considering this environment, SA’s birth rate has fallen to 18.8 births per 1000 people (half of that in 1974). As the generations grow and shift towards smaller families, not only will property inheritance manifest faster, but there will also be more houses for them to inherit. Fewer siblings may, however, increase the wealth of some Gen-Zers, especially if inheriting multiple properties.
Inheritance, excluding property (which may be sold to realise financial gain), can be used to assist Gen-Zers in affording at least a deposit for a home, but Qualtrics, commissioned by real estate website Redfin, proves that this is only popular among 16% of Gen-Zers in combination with Millennials. The study indicates that most of these two groups prefer to live with parents or rent.
Home loan eligibility
Gen Zers’ eligibility for a home loan is impacted by the fact that they comprise some 15% of South Africa’s credit-active population, a growth of 1.7%. Throw in Millennials, and this figure increases to 61% of all new credit activity growth, claims a report from TransUnion. Year-on-year home loan growth among the Gen Z market is now at 31.4%, according to the same report.
According to Debtline, more South African households are using credit to make ends meet. This means long-term payments, such as a home loan, may not be viable for this generation, which is doubly impacted by continual increases in household expenses. Most likely have not yet reached their high-income potential in the job market, and a low and stagnating wage environment does not help.
Do they want houses?
Housing may not prove to be a primary concern for Gen Z, who are cautious about committing to a 20- or 30-year home loan. The majority that did buy property in 2023, bought in the R500 000-R1-million pricing segment. Only some 58 Gen-Zers had bought properties over R3-million by June 2023 said Independent Online last year.
Research clearly indicates that the preference remains for lock-up-and-go properties, which require little maintenance, such as is found within Sectional Title estates, provided these have work-from-home spaces.
An increasingly difficult financial landscape is discouraging. When the interest rate does decline, and house prices rise. As a result, it will push many more Gen-Zers out of the buying market regardless of whether their affordability range is improved. Never forget that; generally, Gen-Zers can be fickle with their money, enjoying purchases that have immediate gratification but not long-term capital gain. They tend to prioritise the acquisition of luxury and travel purchases over property, and if a mortgage compromises their ability to continue with this type of lifestyle, they will be disinclined to be property owners … that is, perhaps until they grow their own family.
