MORTGAGE ME

A New Generation of Homeowners

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Did you know that 60% of Gen Zers (those born between the mid-1990s and 2010s) are expected to own property by 2035? In fact, a small cohort of these under 25-year olds is either already considering purchasing homes or beginning the homebuying process. This is a complete juxtaposition to Millennials (those born between the mid-1980s and 1990s) who have been accused by some of “killing the housing market”, due to their reluctance to buy property.

“When identifying the real-estate trends forecast for 2020 and beyond, it is imperative to take this new generation of aspiring homeowners into account.  This is an age bracket set to benefit from an increased availability of housing options following predicted economic upswings in the future,” says Andrew Price, director of the innovative PropTech platform MortgageMe. “Yet despite this, very little is known about the attitudes that Gen Zers hold towards homeownership within the South African housing market.”

As a forward-thinking PropTech company, MortgageMe is constantly on the lookout for insider insights into both the current and future housing market, and so the company compared the findings from more developed markets with local first-time Gen Z homeowners. Here’s what they found:

Gen Zers are ambitious, yet realistic about the prospect of future homeownership.

A survey conducted by American mortgage lender Freddie Mac[2] found that Gen Z respondents estimated that they would be able to achieve the goal of homeownership by the age of 30. This is three years younger than the median age of Millennial first-time homebuyers, but much later than that of previous generations. Figures gathered by the Bank of America in 2019 indicated that more than 50% of 18 to 24-year-olds were already saving to purchase their first home and that 59% were planning to do so within the next five years.[3] While this data was collected in the States, MortgageMe’s market research has indicated that South African Gen Zers have set themselves a similar timeline for their own homebuying ambitions. Likewise, local experts are anticipating the average age of the first-time South African buyer to drop as the younger generation conforms to global trends.

Gen Z sees the importance of renting but considers the option less appealing than homeownership.

While they acknowledge the attractiveness of renting with its flexibility, reduced stress, and affordability, renting is still generally seen as a temporary status. When asked about this, Gen Z homeowners responded that they did not want to help pay off someone else’s bond each month and that they would rather invest money in their own assets. To do so, these young adults are not only prepared to sacrifice big weddings, fancy cars and high-end fashion but are also prepared to spend less money on tertiary education, take on a second job and move back in with their parents.

Gen Z resents the long-term obligations of home loans but acknowledges their necessity.

Many media outlets generalise Gen Zers as being noncommittal by nature, but prospective homeowners in this bracket acknowledge the necessity of a decades-long loan repayment process as part of being able to afford a home. Rather than feeling trapped, many see home loans as funding for their futures.

Gen Z feels that the current home buying process is outdated and needs to be adjusted for the new decade.

Young home buyers are frustrated by all the hard copies of documents that are required, the back-and-forth emails between agents, buyers and lawyers and the ‘broken telephone’ that ensues between all parties. These processes result in greater expenses for Gen Zers who earn relatively low incomes and lack financial reserves.  With regards to improving this outdated system, one young South African buyer suggests an online portal. “Each stakeholder could get a login and the portal could feature a repository for the necessary documents and a clear status and progression outline so that everyone involved knows the next step, who is responsible for it and how long it may take.”

However, they feel that the majority of online financing and bond options that are currently available ‘represent the future’ by being well implemented and easy to manage.

MortgageMe is one such ‘future thinking’ digital bond aggregating platform that grants users access to a fully automated and digital home loan application process, which includes an affordability calculator and bond certificate services. Acknowledging the concerns raised by the new generation of homebuyers, they’ve ensured that their service saves potential homeowners from having to spend time contacting multiple banks and lenders for financing, as well as from having to generate the necessary financial documents manually offline as MortgageMe enables them to input the required data once while the automated process does the rest.

“Considering recent trends, Gen Z will certainly disrupt the housing market as it currently stands. This will benefit all property stakeholders involved in the industry. But the onus is now on them to get involved. It is time that the property industry takes a good look at the future of the housing market and drags itself into the new century. I, for one, am excited about this new generation of homeowners and the impact they will have on the future  of the industry,” concludes Price.

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