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Watch: Rising costs make it hard for today’s young people to buy property

Affordability struggles make it difficult, if not impossible, for many young people to buy their own homes.Picture: Yan Krukov/Pexels

Affordability struggles make it difficult, if not impossible, for many young people to buy their own homes.Picture: Yan Krukov/Pexels

Published Jun 15, 2022

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News articles from around the world and social media posts have recently told of the difficulties young people today face when wanting to buy homes, compared to generations before them.

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Inflation and rising interest rates have made it almost impossible in many countries.

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In South Africa, the situation is similar, and set to get worse as fuel prices are expected to keep going up.

However, in contrast to some of the trends taking place in the global property market, FNB economist Siphamandla Mkhwanazi says FNB has seen a 20% increase in individuals under the age of 30 purchasing homes in the past three years.

This does not mean that buying a home in South Africa is not more difficult than previous generations though. Nor does it mean that young people can generally afford to buy in these current times.

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Cobus Odendaal, chief executive for Lew Geffen Sotheby’s International Realty in Johannesburg and Randburg says income has not kept up with the broader cost of living, and therefore also, for many, there have not been affordable opportunities to buy their own home.

“We also know that the lack of employment prospects directly after university contributes largely to non-affordability to enter the market.”

Entry-level buyers have also been hard-hit by the aftermath of Covid-19, says Paul Stevens, chief executive of Just Property. Property purchases in this market are “significantly down”.

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“Interest rates are on the rise and are expected to be back at pre-Covid levels by 2024. That means prospective homeowners need to factor in escalating bond costs; what you have to pay back to the bank today will not be the same as what you have to pay back in 12 months, for example, unless you fix the interest rate on your home loan.”

Odendaal says, however, that it is still possible for young people to enter the market if they take the upgrade process “a wee bit slower”.

“Enter the market in a more affordable area, buying a smaller property, then conservatively renovate or improve the home tastefully and keep your ear to the ground via a good relationship with a reputable property consultant. The upgrade opportunity to bigger and better will come sooner or later.”

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While it is true that the cost-of-living has gone up and that South Africa is facing economic challenges at present, Jackie Smith, head of product management for ooba, says there are also new programmes that have been introduced to make home ownership more affordable for young people – especially young families, who may not have been able to attain a home loan in the past.

“These include the government introduced Finance Linked Individual Subsidy Programme (FLISP) that looks to close the ‘gap’ in the home buying market.”

She explains that South African first-time home buyers with a joint gross monthly household income of between R3 501 and R22 000 can qualify for FLISP.

“The subsidy ranges from R30 001 to R130 505 for an existing home or a home that still needs to be built (off-plan). FLISP makes homeownership significantly more affordable for young families and applicants as a cash shortfall – including costs such as bond registration and conveyancing fees in some cases – can be covered through this subsidy.”

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