Twenty years ago, purchasing property was an unquestioned right of passage towards which every household strived. Today, households across the globe are choosing to remain in the rental market rather than own their own property.
“There are several reasons why households choose to rent, affordability being one of the key determining factors for reaching this decision. Within the South African context, it was revealed at this year’s Real Estate Industry Summit that there are roughly 16.6 million households; yet, there are just 6.7 million houses registered at the Deeds Office, which translates into 10 million South Africans who are living in either informal or rented housing. However, this is not a uniquely South African problem. Markets across the globe are reflecting growing disparities in numbers between those who rent and those who own,” says Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett.
Goslett bases this comment on research compiled from the other regions within the RE/MAX network. RE/MAX Australia and New Zealand shared that as per the Australian 2016 Census, there were 9,901,496 occupied private dwellings, with 2,565,695 owned outright; 2,855,222 owned with a mortgage; and 2,561,302 rented. This means that approximately 32% of Australians are in rented homes. Among 25 to 34-year-olds, 37% own and 61% rent their homes. That drops to 10% choosing to own over rent for the sub-24-year-olds.
“Home ownership has been declining and renting has been on the increase for many years. Around two thirds of Australians either owned or were buying their home in June this year, according to the Australian Bureau of Statistics (ABS). This is the lowest proportion since the ABS began collating figures,” explains Michael Davoren, Managing Director, RE/MAX Australia and RE/MAX New Zealand.
Speaking to the realities of the New Zealand landscape, Davoren explains that home ownership was said to be at a six-year low in February last year. Stats New Zealand estimates there to be 1,771,300 households with 62% owned and 34% rented. “Factors affecting low home ownership have included the affordability and the capability of accessing money, employment, cultural trends and lifestyle choices, and a lack of confidence in a country’s leadership,” Davoren explains.
Heading over to the European market, the RE/MAX pan-European consumer survey, January 2016, reveals that 61% of Europeans own the home they live in. This number varies per region, with over 50% of Swiss residents renting their homes, and home ownership rates as high as 93% in Malta.
The American market reflects a similar reality. As of 2017, 64% of US households owned their home, and 34% of US households rented their home. “Reflecting on the latest National Housing Report, the market still poses some challenges for buyers – framed by rising prices and shrinking inventory – but we’re moving into the fourth quarter on much better footing than we had a year ago,” says RE/MAX CEO Adam Contos at the RE/MAX World Headquarters in Denver, Colorado, USA.
Interestingly though, according to the National Association of Realtors, the average age in 2018 for first-time home buyers in the U.S was 46 years old. Because home ownership rates are so high with comparatively low rental rates, yet first time buyers age is so high, this could mean that many adult children are choosing to live rent-free in their parent’s homes for longer within the U.S. market.
Alternatively, this could point to the fact that rising affordability issues are pushing up the average age of first-time homebuyers across the globe. In Australia, the average age of the first-time homebuyer is between 31 to 33 years old, which has steadily risen from around 27-years-old in the early 1990s. In South Africa, BetterBond’s statistics reveal that the average age of first-time buyers is around 34.
Commenting on the South African context, Goslett says that he firmly believes that owning property will bring about greater financial security than lifelong renting, and that the sooner one is able to enter the property market, the sooner one can start generating wealth from this investment. “I therefore strongly recommend that those who have yet to purchase their own home meet with a bond originator to see what they qualify for, as well as a real estate practitioner to find out what that money can afford them. Even if you think you are far away from being able to purchase your own home, meeting with these professionals can help you develop an actionable plan and assist towards achieving your goals sooner,” Goslett concludes.