Mak­ing some sac­ri­fices now will help mil­len­ni­als save for a de­posit

Weekend Argus (Saturday Edition) - - PROPERTY -

WHILE gen­er­a­tion X con­sumers, who are be­tween 31 and 45 years old, are still driv­ing the prop­erty mar­ket in most sec­tors, it is the up-and­com­ing mil­len­ni­als who are the fu­ture home buy­ing force.

How­ever, this gen­er­a­tion, 30 and younger, have some chal­lenges to face in the cur­rent mar­ket, says re­gional di­rec­tor and chief ex­ec­u­tive of RE/MAX of South­ern Africa, Adrian Goslett.

“Many peo­ple in this age group are in the process of start­ing their ca­reers and have large student debts to pay off. It may take some time to get on their feet and build up the nec­es­sary savings to buy their first prop­erty.

“Sav­ing for a home while pay­ing rent and mak­ing student loan pay­ments can be daunt­ing. Although it might be im­pos­si­ble for some at this stage, for oth­ers it could be a mat­ter of hav­ing the dis­ci­pline to make cer­tain sac­ri­fices and set aside money rather than spend it,” says Goslett.

“For most mil­len­ni­als, as with first- time buy­ers, the big­gest hur­dle to over­come is get­ting to­gether the money for the de­posit, es­pe­cially con­sid­er­ing that banks are now ask­ing ap­pli­cants for be­tween 10 and 30 per­cent of the prop­erty’s ask­ing price to qual­ify for fi­nance.”

Ac­cord­ing to Bet­ter­life bond ap­pli­ca­tion sta­tis­tics, the average de­posit per­cent­age re­quired by first-time buy­ers dur­ing June was 21.17 per­cent. Con­sid­er­ing that the average pur­chase price was ap­prox­i­mately R860 000, the de­posit amount re­quired is around R182 000.

Goslett says the best way to ac­com­plish big goals is by start­ing small and re­main­ing con­sis­tent. While the thought of sav­ing an amount as large as R182 000 may seem like a mas­sive task for a younger buyer, it can be achieved by break­ing the amount down into smaller, more man­age­able goals.

“Even if you just start out set­ting aside small initial amounts – just get started and the sooner, the bet­ter,” says Goslett.

“The amount can be in­creased at a later stage, but it’s im­por­tant to get started and re­main con­sis­tent, putting money aside ev­ery month.”

He says the best way to set a monthly savings goal is to find the dif­fer­ence be­tween your cur­rent rental pay­ment and the es­ti­mated bond re­pay­ment, which should in­clude other monthly costs such as bond in­sur­ance, home­owner in­sur­ance, rates and levies. If pos­si­ble, the dif­fer­ence should be set aside as savings.

If you can meet your savings goal con­sis­tently, then you will know that you are in a po­si­tion to buy within your bud­get. If you are strug­gling to meet your monthly savings goals, you might need to ad­just your hous­ing bud­get to what you can re­al­is­ti­cally af­ford.

“It’s im­por­tant to be re­minded of why you are do­ing with­out cer­tain things, and putting away savings. A vis­ual image will be a daily re­minder of the end goal,” Goslett says.

The first place to look for savings is the prop­erty you are rent­ing. Goslett says that if the rental is more than 30 per­cent of your monthly in­come, then it is too much.

“Find­ing more savings will re­quire you to as­sess your cur­rent spend­ing and scru­ti­nise ev­ery ex­pense. There are a num­ber of ways to cut back on spend­ing, it just takes some cre­ativ­ity,” says Goslett.

“There is the con­cern that while mil­len­ni­als are build­ing their savings, ris­ing home prices and interest rates will make it more and more dif­fi­cult for them to get on to the prop­erty lad­der.

“Although there is merit to the con­cern, it is best not to rush into buy­ing prop­erty un­til you are com­pletely ready. Even if it means pay­ing a slightly higher price at a higher interest rate, it is best to have a solid fi­nan­cial foun­da­tion and be con­fi­dent that you can make the com­mit­ment that home­own­er­ship re­quires,” Goslett says.

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