If you are in your 20s or 30s, you will probably spend more on your home that your parents did. Three times more in fact. File Image: IOL
If you are in your 20s or 30s, you will probably spend more on your home that your parents did. Three times more in fact. File Image: IOL

Millennials may be paying 3 times more for their first home

By Staff Reporter Time of article published Nov 30, 2018

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If you are in your 20s or 30s, you will probably spend more on your home that your parents did. 

This is according to new research by Lightstone Property.

The group evaluated the  generational differences between home buyers in SA.

According to the property group, Millennials will spend 3.04 times more on their first home then the generation before them. 

There is no doubt that inflation and the cost of living have changed over the last 20-25 years. 

Lightstone said that South African’s spending power and earnings have been severely affected by various economic factors. This means that if you are thinking about purchasing your first home you might be interested to know that a first time owner will pay at least three times more for that home than the previous generation. 

Michelle de Klerk, a senior property analyst for Lightstone Property said that "looking specifically at Generation X, a ‘first house’ is, on average, a third of the price of when you buy a house between the age of 26-35 (R388,000 vs R139,000). 

“As Generation Y, a ‘first home’ is more than half the price than a house you buy between the age of 26-35.”

“Naturally, house prices increase as the people within that generation get older; however, if we look specifically at Generation Y for the ages 18-25 against the actual inflation of homes, you will see that Generation Y followed the same trend as the market, although the economic crisis of 2007 – 2008 didn’t affect the dip in housing prices as drastically as the entire market over the same period,”  de Klerk explained.

Properties with best price growth

If you are considering buying a home based on current rates of price growth, your best bet would be to buy a home on the coast or one that costs less than R250 000.

The latest figures from Lightstone show the price inflation of homes in these categories are far outpacing the rest.

Lightstone's Index also showed national house prices are growing by 3.85% annually. The annual price increase for homes under R250 000 is 26.8%, while it is only 0.4% for homes over R1.5 million.

Lightstone compares the rates of coastal properties - those located within enumerator areas 500m of the coastline - and those further inland. Its findings show coastal homes recorded annual growth rates of 7.7% compared to inland properties with rates of 5%.

The index shows provincial inflation rates to be:

Western Cape - 8.5%
Eastern Cape - 6.8%
Free State - 3.3%
KwaZulu-Natal - 2.7%
Mpumalanga - 2.5%
Limpopo - 3.1%
Gauteng - 4%
North West - 3.7%

When comparing growth rates of municipalities, Lightstone said: "The inland municipalities of Ekurhuleni, City of Tshwane and City of Johannesburg metros are growing at stable rates between 3% and 6% whereas the coastal municipalities are generally performing above this range."

The annual rates for these municipalities at the end of January are 3.4% in Ekurhuleni, 5.4% in Pretoria and 3.3% in Joburg.

On the coast, Cape Town's annual price growth was 10.3% at the end of January while eThekwini's was only 2.7%.

Sectional title vs full title: At the end of April, sectional title inflation was 4.1%, while the full title growth rate was 3.1%.

Inflation based on property value: Owners of homes classified as low value have reason to be pleased with price inflation rates far outpacing those of higher value properties.

According to Lightstone: "Both the low value and mid-value wealth segments continue to buck the trend by growing at more than 6% annually while the high and luxury wealth segments are inflating at rates below 4%."

The value bands are classified as:

Luxury: over R1.5 million
High value: R700 000 to R1.5m
Mid value: R250 000 to R700 000
Low value: under R250 000

The index showed homes classified as luxury have recorded annual price increases of only 0.4% as at the end of April, while "high value" homes have seen increases of 3.1%.

While mid-value homes are faring better, with annual price growth of 6.7%, owners of low-value homes have seen price growth of 26.8%.


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