Understanding the barriers preventing young South Africans from joining the property market
Image: File
The growing number of young South Africans who are unable to participate in the property market due to poor personal financial management and impaired credit records is concerning.
Young adults are traditionally the engine of first-time homeownership, Mfundo Mabaso, the Product Head at FNB Home and Structured Lending (HSL), said.
When this demographic is financially excluded, it can have negative consequences, including the declining demand for entry-level housing, leading to stagnation in property development.
He also said that it leads to slow property turnover, reducing liquidity and investor confidence, and developers facing reduced incentives to build affordable housing, further limiting access. This also perpetuates a cycle where young people are denied access to the full offerings of the economy, he said.
Mabaso said broader economic consequences, including the inability of youth to access credit and invest in property, have ripple effects across the economy.
'Wealth creation is stunted: Homeownership is a key driver of generational wealth. Without it, many remain in cycles of renting and debt.
'Credit markets are strained: A high rate of defaults among young consumers increases risk premiums and tightens lending criteria.
'Reduced economic participation: Financially excluded youth contribute less to the formal economy and tax base," Mabaso said.
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The financial institution said strategic interventions are needed, which will focus on providing the help young people need.
HSL said it believes in proactive solutions like financial literacy programmes tailored to youth that can build responsible credit behaviour.
It said another intervention is credit rehabilitation initiatives, can help young people repair their financial standing. Innovative mortgage products with flexible terms can ease entry into the property market, it added.
All these were said to be available at FNB HSL to assist the youth to manage their credit behaviour and one day purchase property.
Mabaso said it is everyone's responsibility, both in the public and private sectors, to address the situation, with the government having programmes like First Home Finance to assist qualifying customers with affordability or payments of transfer costs when purchasing a property.
FNB said it also has solutions tailored to low-income earners, such as covering up to 110% of the property purchase price to assist customers with transfer costs, and solutions like collective buying that allow groups of up to twelve people to contribute to the bond repayment of one property.
'All these are solutions aimed at assisting the youth, but it's still the onus of the youth to educate themselves around responsible credit usage so that they have good credit behaviour and records.
"At FNB, we can offer that help and encourage young people to ask for advice and not be put off by the perceived complexity of financial services. We focus on meeting our customers wherever they are in their financial journey.'
If South Africa's youth remain largely excluded from homeownership, property development, and property investment, the impacts will be far-reaching, undermining not just the property sector but also the broader economic and social development goals of the country, Tsekiso Machike, the Spokesperson to the Minister of Human Settlements (DHS), said.
He said this will lead to a shrinking future market for property; as the current property-owning population ages, demand will decline if the youth do not replace them as buyers and investors.
The long-term health of the real estate market depends on consistent generational participation. This will result in an ageing market with reduced liquidity and long-term stagnation, Machike said.
He said this led to a widening wealth gap as property is a major tool for intergenerational wealth creation, and if the youth do not participate in the purchasing of homes or invest early, they will miss out on capital gains, equity building, and passive rental income.
'Thus, entrenching economic inequality, leaving youth more vulnerable to poverty, housing insecurity, and financial instability.'
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