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The Citizen
01-05-2025
- Business
- The Citizen
From wedding bells to doorbells
The growing momentum of a global homeownership trend dubbed 'houses before spouses' has seen more young homebuyers choosing to purchase a home prior to getting married or buying jointly with a spouse or partner. This same trend has been mirrored in South Africa where, according to ooba Home Loans, the number of property purchases made with a spouse has dropped from 34% to 27% over the past decade. At the same time, the share of first-time homebuyers without dependents has increased to 64%. While some buyers still opt for joint purchases, many are turning to an alternative co-ownership model as Grant Smee, CEO of Only Realty Property Group explains: 'It's becoming increasingly apparent that, to navigate the financial challenges of homeownership, many Gen Z and millennial buyers are choosing to co-own property with friends or family, rather than relying on the financial security of a spouse.' Smee adds that first-time buyers, who are opting to purchase properties alone, are also getting older – a trend driven largely by economic uncertainty, high unemployment rates and financial instability. When it comes to 'houses before spouses' in the global context, the US leads the charge with single women owning approximately 2.72 million more homes than single men (New York Post). In the UK, solo households now make up a third of all households, according to the Urban Institute. Similarly, in Australia, the trend is gaining traction among younger generations. Houses Before Spouses Still Trending Locally – Especially in Gauteng & Amongst Women Smee notes that, for many, owning a home remains one of life's most significant achievements: 'For younger buyers, homeownership is still seen as a major aspiration – particularly in a challenging economic environment where saving for a deposit, securing a home loan, and ultimately purchasing a property are far from easy. That's why, more often than not, it takes precedence over other traditional life milestones.' Data presented by FNB indicates that buyers earning between R3,500 and R29,600 per month – referred to as the 'affordable housing segment' – are increasingly purchase homes collectively to manage high interest rates and rising costs. 'This segment saw 47% of home loans issued in Gauteng over the past four years, 18% issued in the Western Cape (despite having the highest property prices in the country overall), and 12% issued in KwaZulu Natal – as per Standard Bank's most recent data.' Women are in strong support of the 'houses before spouses' trend, with Lightstone data in July '24 reflecting that women own nearly 60% of South Africa's residential housing stock. 'Female first-time buyers now outnumber their male counterparts, with the majority being single or divorced.' Tips for Navigating the Joint Ownership Journey As the trend continues to grow in popularity, Smee believes that more millennials and Gen Zs – in particular – will choose to purchase jointly. 'Housing affordability remains a challenge and this is where joint homeownership comes in. It also helps to minimise and spread risk across the parties entering the agreement, however, buyers must understand the legal, financial and practical implications.' He unpacks these as follows: Managing Financial Risks A major risk of joint ownership is that if one owner stops contributing financially, the remaining owners must cover their share to avoid legal and financial consequences. 'This is why a well-drafted co-ownership agreement is essential,' says Smee. 'It should outline how costs are divided and establish solutions for non-payment, such as a buyout clause or forced sale options.' What Happens In the Case of Death In the event of a co-owner's death, their share does not automatically transfer to the surviving owners. 'The share becomes part of the deceased's estate and is distributed according to their will or intestate succession laws,' explains Smee. 'Meanwhile, the remaining bondholders remain jointly liable for loan repayments until the estate is settled and ownership is transferred.' Smee advises co-owners to maintain up-to-date wills to avoid legal complications. Exiting the Agreement If disputes arise over selling the property – such as one owner wanting to sell while others do not – an owner can apply to the court for an order to force a sale, known as actio communi dividundo. 'A co-owner could also attempt to sell their share without the consent of the others, which may introduce an unknown third party into the arrangement,' Smee cautions. 'A buyout agreement can help prevent such conflicts by ensuring that remaining owners have the first option to purchase the departing party's share.' If all owners agree to sell, the property is sold, and proceeds are divided according to ownership percentages. The Importance of a Co-Ownership Agreement A formal co-ownership agreement should outline: Ownership rights and obligations Procedures for selling or transferring shares Recourse for non-payment Looking ahead, Smee believes that Gen Zs in particular will change the way in which property is viewed, purchased and ultimately, used. 'While millennials have been largely responsible for driving this trend, I suspect that Gen Zs will transform the homeownership landscape in years to come. Whether it's through joint or single homeownership, we do anticipate it to be an exciting time.' Issued by Jess Gois
Zawya
31-01-2025
- Business
- Zawya
Will lower interest rates drive buy-to-let investment in South Africa?
Despite economic headwinds and high inflation, South Africa's rental market showed resilience throughout 2024. However, a quick succession of interest-rate cuts has many speculating about whether more tenants will finally make the move to homeownership. '2024 was another big year for South Africa's property rental market, with all major regions registering positive growth,' shares Grant Smee, chief executive officer of Only Realty Property Group, pointing to June 2024 when rental growth outpaced inflation for the first time in nearly five years, increasing by 5.2% year-on-year. 'The country's most expensive province, the Western Cape, saw a rental growth rate of 9.7%, narrowly outperformed by the country's front runner, the North West by just 0.1%. Conversely, Gauteng and KwaZulu Natal registered some of the lowest growth rates.' StatsSA's Household Survey revealed a notable increase in the percentage of households opting to rent, climbing from 17.7% in 2020 to 23.9% in 2022. Building on this trend, TPN reported a slowdown in rental escalations to 4.29% in Q2 2024, further reinforcing the growing shift toward renting. 'Rental properties provide flexibility, lower overhead costs and give tenants access to areas and homes that might otherwise be unaffordable if purchased. This is especially true in gated estates, where monthly levies can reach tens of thousands of rands,' explains Smee. Will rate cuts impact the performance of the buoyant rental market? 'While the rate cuts coming into play are notable, we are still a long way off the multi-decade lows of 2020,' he says. 'In addition, many potential homebuyers are grappling with the high cost of living and reduced savings.' Smee adds that financial stability and savings are two important considerations for any lender approving a home loan. 'There is also generally a requirement to put down a deposit and without ample savings, this is not always possible.' He does, however, add that for those with some liquidity, lowered interest rates may draw in buy-to-let investors who have been waiting in the wings. 'Buy-to-let investors are on the rise – particularly in the Western Cape – where there is high demand. For those who have been waiting, now is a good time to secure a property that covers the bills and can potentially yield additional income,' says Smee. 'It's also an opportune time for investors wanting to expand their portfolios and for property owners wanting to upscale.' Overall, Smee believes that the advantages of interest-rate cuts far outweigh any potential downfalls. 'While areas privy to high levels of rental property vacancies such as Gauteng may feel the impact more than others, it will certainly offer some benefits too.' Smee highlights one potential drawback of the current climate for tenants, saying: 'For those who own a home, the benefits of rate cuts are immediate. For tenants on the other hand, the financial benefits will most likely not be felt at all.' Tips to go from renting to buying: For those looking to capitalise on a year of interest-rate cuts, Smee offers four tips: - Know your credit score: Your credit score tells the bank whether you can repay your debts on time and - without a good credit score - you will not be approved for a home loan. A number over 610 is generally acceptable and nothing less will suffice. - Research: Once you know your credit score and what you can afford, get to know what's available. Set some alerts so that you have an idea of property prices in your desired area (and within your range of requirements) and become more knowledgeable on the market. Understanding the market will provide you with better leverage in a case where you may need to negotiate. - Start saving: Home loans are expensive and paying them down quickly will make you more financially resilient in times of high interest rates. Remember, interest rates do fluctuate so you need to understand best- and worst-case scenarios when it comes to your repayments. I recommend that potential buyers set up a separate account for savings, preferably a fixed, interest-earning account. This way, you can't touch the money and it starts to grow as it earns interest. I would also advise that you set up an automatic debit order so that it becomes routine. All rights reserved. © 2022. Provided by SyndiGate Media Inc.
