Gen Z revamps property game with tech-savvy homes and communal living

Their heightened awareness of climate change means they value homes built from environmentally friendly materials.

Their heightened awareness of climate change means they value homes built from environmentally friendly materials.

Published Sep 30, 2023


By Marc Ederburg, audit partner and real estate sector head, Mazars in South Africa

Generation Z is reshaping the property market that they've only begun to enter.

While millennials born between 1981 and 1996 have generally stuck to renting, Gen Z differs in that they believe property is worth the investment.

To do so, and confronted with challenges around property affordability, people under 27 are willing to make do with smaller, shared spaces. However, having grown up with technology they prefer connected and automated homes.

Furthermore, their heightened awareness of climate change means they value homes built from environmentally friendly materials.

This means the market for those born 1996 to 2010 is fraught with challenges.

South Africa's economy is barely growing. FNB's Property Barometer shows that inflation has eroded returns in the housing market for the past six years, raising the question of whether it's a poor investment or a good entry point. A 43% unemployment rate among people under 34 makes the dream of owning a home unlikely for most and significantly shrinks the industry's target market.

Gen Z-ers have lived through two global disasters – the 2008 global financial crisis and the 2020 Covid-19 pandemic and its subsequent lockdowns. This scarred them with a deep sense of economic gloom and a need to belong to support groups.

A US survey found that 29% of Gen Z-ers still live at home, while 32% of those who managed to leave the nest spend half their income on rent or mortgage. Consequently, many Gen Z-ers are opting to live at home with their parents during their first years of employment to save and eventually buy their properties or put down a deposit, Only Realty Property Group Managing Director Grant Smee was recently quoted as saying.

In South Africa, Gen Z homebuyers account for just 3.75% of sales over the past year, according to data compiled by Lightstone Property. Nonetheless, that these young adults can still afford to invest in South Africa's property market bodes well for the future.

In a recent radio interview, Sotheby's International Realty SA Chief Executive Officer Yael Geffen gave illustrations of how some Gen Z-ers are able to buy their own property. He pointed to a trend for Gen Z-ers to earn foreign currency abroad, for instance on cruise liners or au pairing often earn enough to purchase a property outright, and convert it to an Airbnb to boost their savings for when they return to South Africa.

Another source of finance comes from inheritance, family trusts, investment maturation, or successful business ventures of post-millennials, a Rawson Property Group sales manager was quoted online as saying.

In addition, a new wave of prospective homebuyers are hustling for more bang for their buck with ‘lock-up-and-go’ apartments that suit a fast-paced, dynamic lifestyles - and often also rent them out.

Sometimes, Gen Z-ers seek out smaller properties that are easier to maintain as well as properties in cheaper areas – with some exploring alternative housing options such as co-living spaces, tiny homes, or apartments in converted office blocks and warehouses.

Co-living spaces, or communal living arrangements where residents share common areas such as kitchens and living rooms, are gaining traction in South Africa. These are often fully furnished apartments, where the block will typically offer cleaning and laundry services, gym memberships, and social events to boost a sense of community at an affordable price point.

Mixed-use developments, which usually include amenities such as restaurants, shops, and leisure activities all within convenient walking distances, are also growing in popularity among Gen Z buyers, as they offer affordable opportunities for social engagement.

Gen Z-ers take more care planning a property purchase, taking more time to research and view so as to ensure all their needs are met, according to a survey of the US real estate industry by RE/MAX. For instance, a percentage prefer to buy newly-built homes so as to secure modern energy-saving features, lower maintenance costs and a zero-carbon footprint.

Modern homes need to cater for the work-from-home phenomenon to appeal to future buyers, while off-grid solutions become crucial to circumventing the current energy shortage and consequent connectivity issues.

According to market research company Brainy Insights, the smart home market - with remote control and wireless lighting, dishwashers, refrigerators, and security systems - is expected to grow sevenfold by 2023. This showcases how smart technologies are causing shifts in the market, with intelligent features having already become the norm in property construction in developed markets.

Deloitte's Global 2023 Gen Z and Millennial Survey reveals that 61% of Gen Z believe it will only become more difficult, even impossible, to purchase a home. Consequently, the push for financial planning and diligence extends from adapting to surviving the challenging economic climate.

Increases in South Africa's cost of living are at the forefront of the new generation's mind, according to Deloitte's survey, followed by unemployment and climate change.

It is imperative for developers to innovate so as to strategically combine the country's challenges and opportunities to stay ahead of the curve. Otherwise, there’s the risk that the foreign currency inflows find properties elsewhere, or that the Gen Z market remains stagnant.

Marc Ederburg is an audit partner and real estate sector head, Mazars in South Africa.