The estimated average age of all home buyers (including first time and repeat home buyers) is continuing a long term trend upwards.
This is according to the latest FNB property barometer, which notes that one potential reason for the gap is a weak economy.
This has led to it becoming increasingly difficult for young working age people enter the labour market – and thus the property market.
However, another key factor in the increasing age could be due to South Africa’s ageing middle class population participating in the housing market at an older age – moreso than was perhaps previously the case, the bank said.
“Near the end of last decades pre-2008 housing bubble, the estimated average age of individual property buyers was 40.69 years as at December 2007,” FNB said.
“By March 2009, this estimate had risen to 43.6 years and, despite some decline in the 2 years thereafter, it never again got back to that late-2007 level. By 2012, it had begun to renew its rising trend, reaching 44.11 years by April 2018.”
FNB found that younger buyers, on average, are more sensitive to economic and interest rate shocks, so it was this group that ‘sat on the sidelines’ in greater numbers during that time waiting for better economic times.
Younger aspirant first-time buyers are typically the more cyclical group of home buyers, given that many have no financial buffers with which to weather an economic storm, and are highly credit-dependent too.
“The fact that the average age of individual buyers never returned to that late-2017 low of 40.69 years has much to do with the fact that economic conditions never really returned to those pre-2007 ‘glory days’ of 5%+ GDP growth,” FNB said.
“The interest rate cuts and economic growth recovery of sorts from 2009 to 2011 brought about some ‘short-lived’ decline in average age, as younger home buyers returned to the market in greater numbers.
“But post-2011, economic stagnation re-emerged, which along with 2014-2016 interest rate hiking saw the average age of buyers increasing once more through much of the 2012 to 2018 period.
“But there is more than that. There is a longer term rising average age trend that appears to be at play, which may be a function of longer term demographic trends, or at least the demographic trends of the ‘middle class’.
“The average buyer age started 1980 at a significantly lower estimate of 38.36 years, and despite numerous short term cyclical ups and downs, has sustained a long term rising trend to reach the most recent 44.85 years – an increase in excess of six years.”
FNB’s data also points to a very significant increase in elderly age groups members’ participation in the housing market in recent years.
The estimate for those sellers that are selling to ‘downscale due to life stage’ (normally older sellers retiring or whose children have left home, and there is no longer a need for such a large home) was at 25%, far above the 12% low of 2008 around the time of the recession when the survey question started.
“An ageing group of participants in the housing market is due to short term cyclical factors, as well as reflecting a longer term more permanent structural change,” it said.
“The long term multi-decade trend may be driven by demographic changes, including significant growth in the older age cohort numbers.
“In addition, a noticeable renewed rise in average age of home buyers since around 2012 arguably has much to do with a stagnating economy from around that time as well as some mild interest rate hiking from 2014 to 2016.
“Such economic pressures tend to deter the highly credit-driven and financially constrained aspirant young buyers from entering the market more than they deter older repeat buyers, the latter who often have far bigger financial buffers built up, as well as having significant equity in the property that they sell in tandem with the new one that they buy,” it said.