Bank of America conducted a survey earlier this year and found that more than 50% of 18-24-year-olds have been already saving towards purchasing their first home and that 59% were actually planning to do so in the next five years.
With South Africa focusing on youth month, CEO of South Africa’s leading bond originator, BetterBond, Rudi Botha, provides insight into the figures represented in the most recent survey.
“The survey also found that to achieve this dream, these young adults are not only prepared to give up big weddings, shopping expeditions and travel, but also prepared to spend less on tertiary education, take on a second job and move back in (or continue to live) with their parents so they can save a substantial deposit,” he said.
Gen-Z is comprised of individuals born between 1995 and 2010 and are known as the worlds ‘digital natives’, exposed to the internet, social networks and streaming media their whole lives. This generation of individuals have proven to have a different approach and view to real estate when compared to millennials, those born between 1980 and 1994.
Botha elaborates on the difference between these two generators when purchasing real estate.
“Our statistics show that due to this Millennial drag, the average age of first-time buyers in SA has risen from 24 to 36 over the past 20 years, but we believe this figure could tumble now if the local members of Gen-Z follow their counterparts elsewhere in the world – which it is highly likely that they will do because of the increasing globalisation of trends via social media.”
Adding that the attitude of millennials could revitalise the property market in South Africa.
“This could provide significant impetus to the economy and further boost consumer confidence as the country settles down to President Cyril Ramaphosa’s first five-year term in office. As it is, offers to purchase and home loan applications have shown a significant year-on-year increase in the second quarter and especially following the national and provincial Elections,” said Botha
Botha goes on to explain why the attitude of Gen-Z differs, attributing different consumption patterns to the fact that members of this age group are more individualistic and entrepreneurial. Adding that Gen-Z individuals are more likely to start their own businesses after leaving school.
“They are also more willing to self-educate through short courses and online learning and are developing a preference for owning property in rural or suburban areas (unlike the urbanite Millennials) which has caused them to also be referred to as the ‘Homestead Generation’.
Many of them work remotely, so they can happily settle anywhere that has a good internet connection, and they tend to be very eco-conscious, with a penchant for growing their own food and making their own products while promoting sustainability through recycling, reusing and reducing.”
Prospective Gen-Z buyers should engage with a reputable bond originator such as BetterBond and secure a pre-qualification for a home loan before going house hunting.
“Taking this step will give them a clear idea of their buying power and enable them to focus their home search on properties they can afford, taking into account the additional costs of purchase including transfer duty, legal fees, bond registration and insurance, and additional ongoing costs of ownership including maintenance, property tax and local authority service charges,” said Botha
Botha says that bond originators also use a multi-lender submission process for home loan applications which ensures that prospective borrowers obtain the best possible interest rate applicable to their financial circumstances.
“This is important because even a relatively small rate concession can result in a significant reduction in the total cost of the property over the lifetime of the bond.
“Currently, the average variation between the best and worst rates offered on each home loan application we submit is 0,5%, and on a 20-year bond of R1,5 million, that translates into a potential saving of more than R120 000 in interest, plus a total of about R6000 a year off the monthly bond instalments.”
To work out how much a lower interest rate could save you, use the BetterBond affordability calculator at https://www.betterbond.co.za/calculators/affordability.