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Jun 13 2011

Generation X Leads Property Recovery

Posted in General, Property Matters

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Generation X will lead the property market to recovery in the United States and in SA. A more positive sentiment has returned to the market in the US as well as in South Africa, especially among professionals who can afford to take advantage of the current market conditions.
A report by an American company, John Burns Real Estate Consulting, revealed that of the 10 000 buyers and potential buyers they surveyed in 27 metro areas throughout the US, between 85% and 89% said that they felt now was a good time to buy a home and most felt optimistic about a new home purchase.

There has been a marked increase in activity in both the local and international property markets in the first quarter of 2011; however recovery in the global market continues to be slow as countries are experiencing different rates of recovery depending on the various economic policies they have in place.

In the US market, for example, the unemployment rate has reduced and the US stock exchange has rebounded massively since 2009. Positive property statistics have been reported with an increase in transaction volumes, especially in existing home sales and there continues to be a strong demand for distressed properties.

As with the case in the US, South Africans are currently seeing more realistic property pricing and are experiencing the lowest interest rate in the last 38 years. This has had an influence on the market and has contributed positively to the increase in property transactions. Added to this, realistic house prices and interest rates have also opened up the property market to people who could not afford to buy a house five years ago.

Around the world the Generation X population, which consists of adults between the ages of 31 and 45 who are generally well established in their careers, are looking to get their foot in the property-ownership door. According to real estate experts, these potential property buyers are most likely to decide that given the current market conditions, now is a good time to purchase a property. The Generation X market segment makes up 32% of the property-buying population in the US. While they are not the largest population-buying group, they are definitely the most active. In contrast Baby Boomers in the US, who make up 41% of the property-buying population, are still trying to make up losses in their savings and investments due to the recession conditions of the last few years and are more cautious in their buying decisions.

Statistically the population demographic in South Africa looks slightly different; Baby Boomers make up a much smaller percentage of the population than Generation X. Between the years 1950 and 1965 there were 13,5 million births in South Africa (Baby Boomers) compared with the 18,74 million births (Generation X) between 1965 and 1985.

However, when it comes to buying population, South Africa has many similarities to the US. According to John Loos, FNB Home Loan Strategist, the most noticeable increase in the property market buying share in South Africa was among the Generation X group who made up 28,1% of the total purchases in the first quarter of this year. This is compared to the Baby Boomers whose buying share increased to 21.17% of the total purchases in the first quarter of this year.

Younger buyers have also made their mark on the property market recently and it seems that Generation Y will not be outdone by their predecessors. Loos says that information from Deeds Office data on individual transactions revealed that in the last four quarters, 15.3% of first time buyers were under the age of 30.

Overall market confidence has improved and we have seen a higher number of first time buyers in the first quarter of 2011 than during the last quarter of 2010. It is clear that it is the younger professionals who are leading the property market recovery both in South Africa and abroad. Although we may still have an interesting road ahead of us in terms of full market recovery, things are definitely looking up for property markets around the world.

The Real Estate Doctor

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  • Southern Suburbs, Cape Town