Are Millennials doomed to rent forever?
Category News
Is it possible for the average Millennial to buy property in today's economic climate? Or are they forever doomed to rent? Chris Hajec, Managing Director at Seeff Randburg weighs in.
Although Millennials might feel like they are “doomed to rent forever" that may be overstating things a little bit, says Hajec.
“In fact, quite the opposite is true as we are in a market which currently offers a wide range of affordable options which Millennials are busy purchasing as we speak.
Age wise, many Millennials (born 1980-2000) have just started to arrive at the age of the average first time home buyer in South Africa (37 years old).
This means that they are reaching a time in their life where finances are stable, job security good and they are starting to recognise the good business sense and investment opportunity that resides in owning your own home versus renting”.
Hajec continues that first time home buyers, of which Millennials are fast coming to dominate as a majority of the demographic, were around 26% of the total number of home buyers in Gauteng in 2017.
“The average first time home buyer property price is somewhere around R680 000. In fact, that would explain the popularity of Randburg for Millennials, as it is is among the regions in Gauteng that could currently be characterised as the epicentre of an affordable entry level (R600 000 to R1.3 million) housing market boom.
So in short, the market tells us any doom and gloom about perpetual renting is overshadowed by the reality, which is that the market is robust and that Millennials are playing a major role in stimulating and maintaining the strength of the affordable entry level price categories.
The biggest factor to Millennials is price, followed only distantly by position and then amenities. Why? Because the single biggest bar to millennials is the affordability factor and the need to have accumulated a nest egg to cover a down payment and the costs associated with the purchase of their first property.
Yes, there are a number of loan products which are 100% finance, but 100% finance is generally only the best option when it is the only way to get into the property.
The question does become relevant however when you consider the higher lifestyle renting can generally afford you in terms of space and amenities.
The same money provides you with more amenities and space when renting but less space and amenities when buying, particularly when you factor in the additional costs of home ownership in the upkeep, rates, taxes and other associated fees.
So I guess that one could say that you are doomed to continue renting as a millennial if you aren’t prepared to compromise and accept what your Rand can buy you in space and extras.
Also, if you are unable or unwilling to engage in the fiscal responsibilities required for purchasing, namely, saving in advance things may also look gloomy.
There is certainly a bit of belt tightening associated with purchasing your first home”.
Author: Seeff
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