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Youth is not always on your side
In today’s property market many young buyers may be facing more hurdles than their counterparts from the older generations, says Adrian Goslett, CEO of RE/MAX of Southern Africa.
He says that although interest rates are still remarkably low and market pressure over the last few years has brought property prices down, many young buyers will still struggle to get their foot into the property market door. With a competitive job market and some young buyers having large student-loan debt, those born between 1985 and 1993 will find access to finance more difficult than other age groups that are more established in their careers and can prove the level of affordability required by financial institutions.
“There is definitely a more positive sentiment in the market and we are seeing more buyers entering the market than previously, especially first-time buyers, due to property prices being more affordable, as well as the relaxation of lending criteria by many of the banks. However, many of the current buyers are predominately from the Generation X and Baby-Boomer age groups, who are established and have the access to finance and can save up for the necessary deposits required to secure a property purchase,” says Goslett.
Goslett believes that the reasons for these buying trends are due to the fact that buyers between the ages of 31 and 45, referred to as Generation X, generally have the necessary financial stability to take advantage of the current market conditions. In addition, the majority of the Baby Boomer generation already own property and are able to sell their property in order to purchase another, he says. Many of the buyers in these categories also have savings that they can use for deposits. According to John Loos, FNB Home Loan Strategist, the Generation X group along with the Baby Boomers made their mark in the property market in 2011. And while the younger generation of buyers did feature in the property market, their statistics lagged behind the other two groups. Information from Deeds Office data on individual transactions revealed that in the last four quarters, only 15.3% of first-time buyers were under the age of 30.
A recent study concluded among young adults in the US found that as many as 48% of the participants felt that they are worse off than their Baby Boomer parents. In fact, only 20% of the group said that they believe that they are better off than their parent’s generation.
“Today’s younger generation have a lot of potential and are probably the most technologically savvy and diverse. However, although we are seeing first-time buyers in the market under the age of 30, with the hurdles they face in terms of access to finance and the rise of living costs, many young buyers may have to delay their dreams of owning property,” says Goslett.
While the younger generation does believe in property equity and would rather buy than rent, the number of young consumers in the rental market is growing.
“As the younger buyers in the market gain momentum in their careers and are able to obtain the necessary finance to purchase property, there is little doubt that they will contribute towards a sharp increase in the demand for property, ” concludes Goslett.