Buy your first home before you are 40

Less than 15% of South Africans purchase property under the age of 40, which paints a gloomy picture for younger buyers who hope to enter the property market sooner rather than later.

According to a report published in Lightstone Property’s July newsletter: “the age profile of owners has shifted towards the older population – under 40s account for just 15% of properties owned today, down from 22%, and this trend is true for the more affordable as well as the higher value properties.”

Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa says that this is an alarming statistic considering that owning property is one of the surest ways of securing future wealth and long-term financial stability. “To get the most out of the investment, homeowners need to have the home loan paid off in full before they reach retirement age – it is less than ideal to be paying monthly instalments when living off a pension or retirement savings. With loan terms extending to 20 or even 30 years, homeowners are cutting things fine by only entering the market in their 40s,” Goslett remarks.

While there are external factors out of young buyers’ control, such as high levels of youth unemployment and a lack of affordable housing developments, there are some factors entirely within their control, such as setting up savings from their first paycheck and remaining vigilant about their credit score.

“South Africans are notoriously bad at saving their money. Those who want to enter the property market before their 40th birthday will need to practice the self-discipline to save for their future, most likely by sacrificing on immediate pleasures and cutting back on living expenses wherever possible,” he suggests.

Beyond this, Goslett cautions young buyers to watch their credit score so that they do not get themselves blacklisted. “The better your credit score, the better your chances are for securing home finance. Financial institutions will also offer buyers a lower interest rate on the home loan if they have a favourable credit score. To keep your credit score in check, be sure to make all credit repayments in full before the due date and try to keep the amount of debt to your name as low as possible,” Goslett explains.

While climbing onto the property ladder is no easy feat, Goslett encourages young buyers to develop a plan to ensure that they will one day be able to afford the costs of buying their own home. “For those in their 20s, buying a home may seem like something that is too far away to start planning for right now. But, with the right planning and preparations, young buyers could afford to purchase a home much sooner than they might think. I would strongly recommend speaking to a financial planner, a bond originator, and a real estate professional sooner rather than later. Together, these professionals can help young buyers create a plan of action or, at the very least, provide a better idea of what it will take for them to enter the property market,” Goslett concludes.

PERSONAL FINANCE