Fewer Young South Africans Buying Homes: The Reality Behind the Numbers

Changing Dynamics in the Property Market

South Africa's younger generation is keen to enter the property market, but many are waiting for better conditions before making a move. According to Lightstone data, the overall number of home purchases in South Africa has dropped by 13% over the past five years, with a significant decline in the 26 to 35 age group. Between 2018 and 2023, home purchases among young adults fell by 25%, with this age group accounting for only 27% of total property purchases in 2023. Gavin Lomberg, CEO of ooba Home Loans, attributes this decline to young buyers' sensitivity to interest-rate hikes. Many are holding out for anticipated rate cuts in late 2024.

Focus on Youth Month and Building Generational Wealth

June, celebrated as Youth Month, highlights the need to make property more accessible for young buyers. ooba Home Loans data indicates that the average age of first-time homebuyers has risen by three years over the past decade, now at 36. Additionally, the volume of home-loan applications from first-time buyers has decreased from 56% in June 2020 to 46% in May 2024. However, not all news is negative. Lomberg notes that a significant portion of younger buyers are using property to build wealth, with 15.3% of buyers aged 18 to 25 being repeat purchasers. Economic constraints have certainly impacted first-time homebuyer demand, but misconceptions about renting versus buying also play a role. For instance, the average first-time homebuyer purchase price in May 2024 was R1.19m, with monthly payments potentially lower than renting the same property in some areas.

Lomberg emphasizes that young people should consider property as a means to build generational wealth. Investing in buy-to-let properties can provide additional income streams and tax benefits, contributing to long-term financial security. Encouragingly, the percentage of solo buyers aged 18 to 25 has increased from 67% of home-loan applications in 2019 to 73% in 2024. First-time homebuyers are also making larger investments, with the average purchase price rising by 3.2% year-on-year to R1.19m in May 2024. For buyers aged 18 to 25, this price has increased by 30% over the past five years, compared to an 18% increase for those aged 37 and older.

Regional Trends and Supporting Young Homebuyers' Aspirations

Regionally, the Western Cape remains the most expensive for first-time homebuyers, with an average price of R1.57m. Many young buyers in the area are opting for affordable micro-apartments in high-density, tourist-friendly neighbourhoods, which offer lifestyle amenities like retail outlets, restaurants, co-working spaces, and gyms. These units are particularly appealing for young investors looking to benefit from Cape Town's thriving short-term rental market. There is a noticeable demand for investment properties among younger buyers, with home-loan applications for such properties among those aged 18 to 25 increasing from 3% in 2019 to over 9% in 2024.

Lomberg acknowledges that while the rise in young property investors is promising, many young South Africans still face significant affordability challenges. ooba Home Loans partners with the government backed First Home Finance program to help first-time buyers earning between R3,501 and R22,000 per month. This subsidy, ranging from R38,911 to R169,265, can be used for purchasing existing or new homes and covering upfront costs like deposits and bond registration fees. The First Home Finance program can be complex, but ooba Home Loans helps with pre-qualification, ensuring paperwork is in order, and determining eligible finance amounts. Lomberg concludes that affordable homeownership should be accessible to all South Africans, and ooba Home Loans is dedicated to making that a reality.