South Africans in their 20s, like most of their countrymen and women, may be struggling financially, but this generation continues to prioritise saving money in order to buy their own homes.
While many Millennials – those born between 1981 and 1996 – prefer to rent their homes due to the flexibility this offers, many aspirant Gen Zs – born from 1997 onwards, have their sights “firmly set” on homeownership, says Grant Smee, managing director of Only Realty Property Group.
Many of these would-be buyers recognise the strategic benefits of investing in property as a wealth creation strategy, and if they are buying a home to live in, they’re thinking about the long-term appreciation of owning a tangible asset, and the profit they will make when it comes time to sell.
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“Other young home buyers are choosing to purchase rental properties that will generate additional income while they continue living at home to maximise their savings.”
As property experts have recently explained, owning a property is not necessarily the best investment a person can make. Nor is it always a good time to buy a property. However, due to the contractual obligation that comes with paying back a home loan, it is, for most people, the most successful way of saving money, albeit a forced saving.
Unlike previous generations, Smee says Gen Zs are opting to live at home during their first few years of employment so that they can save money and eventually buy their own properties. And even though the rising cost of living in South Africa and the multiple recent interest rate hikes have also resulted in many choosing to delay buying a property, these youngsters also understand that homeownership is not something that should be rushed into as it is a “long-term commitment with significant financial implications”.
By staying at home for longer, young would-be buyers are giving themselves time to save for a deposit. While banks are offering 100% and higher home loans, many first-time buyers are prioritising deposits more than ever. Some are even taking out personal loans to help create their deposits.
Citing data from ooba Home Loans, Smee says the average size of deposits from this demographic rose to 10.1% in January 2023. This is the first time the average deposit size has exceeded 10% since the start of the pandemic.
“However, not having a deposit should not deter Gen Z buyers as banks continue to approve 100% (zero deposit) bonds at record high levels – especially for first-time home buyers. They can also take advantage of the competitive lending environment, with many banks offering buyers interest rates below prime.”
In addition, Smee says homes are becoming more affordable due to low house price inflation (HPI) in many parts of the country. The average purchase price for first-time buyers was R1.12 million in 2022, 0.2% below the 2021 average, according to the ooba data.
Where they want to buy
Analysing statistics from Lightstone, he says Gen Z first-time buyers have a “clear preference” for metros as opposed to rural areas. Inland, Pretoria – which has been named as the world’s most affordable capital city in which to buy a home – has proved to be most popular with first-time buyers, followed by Johannesburg, eMahleni and Rustenburg.
On the coast, Cape Town saw the majority of first-time buyers, followed by Gqeberha – which has seen a spike in young home buyers in recent months, and Durban.
“While many Gen Zers are interested in living in cities, they are also looking at affordability, prompting them to choose up-and-coming neighbourhoods on the outskirts of urban areas rather than the most expensive neighbourhoods in city centres.
“As the most tech-savvy generation to date, they’re also primarily using technology to inform their purchasing decisions and to find a home.”
What they want to buy
Smee states that this generation is very deliberate in their property strategy and has clear preferences when it comes to the home of their choice. He lists some of Gen Z’s top home buying preferences:
- Lock-up-and-go: The majority of young buyers don’t want to be responsible for the maintenance required when purchasing a large freehold home and instead prefer sectional-tile. These units are easier to rent out, which is often a key part of the Gen Z property strategy
- Mixed-use developments: These typically include a variety of amenities such as restaurants, shops, and entertainment options, all within convenient walking distances. Units within these developments are often more affordable and offer greater opportunities for socialisation, which is important to Gen Z buyers
- Sustainability-focused: Gen Z is environmentally conscious and, therefore, increasingly looking for
Ultimately though, Gen Z home buyers’ number one priority is affordability.
“They are often looking for smaller, more affordable homes or seeking out areas with lower housing prices. Some are also considering alternative housing options like tiny homes or co-living spaces, and we expect these to be trends that will dominate the residential property market in the next few years.”
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