Gen Z and the future of real estate

The oldest members of Generation Z haven't even reached 30 yet, but they are already making their mark in real estate and are definitely the cohort for home sellers and developers to watch, says Gerhard Kotzé, CEO of the RealNet property group.

"In the past year, records show, buyers aged 18 to 25 accounted for around 10% of all property transfers, despite the rising cost of living and higher interest rates that tend to affect young, first-time buyers and investors much more than older, repeat buyers. 

"And we expect the percentage of Gen Z buyers (sometimes also called Zoomers) to increase rapidly over the next couple of years as interest rates decline, affordability improves and increasing numbers of these individuals also become more established in their careers and businesses."

Indeed, he says, many in this generation can be expected to start and succeed in their own businesses. "Gen Z is known to have a very different approach to the previous generation, the Millennials, when it comes to achieving financial success.

"As the first generation to have always been connected to the Internet, they are totally familiar with the idea of people using smartphones and digital media platforms to start online careers and businesses - and being able to run those businesses from anywhere with a good wifi signal. They are also highly entrepreneurial and tend to prefer freelancing, contract work and creating multiple income streams from different sources to working permanently for a traditional company or big corporation. 

"In a recent overseas survey, for example,  58% of Gen Z respondents said they were planning to have their own business one day and 14% said they already did."

What is more, says Kotzé, many have  decided against three or four-year degrees and the associated student debt, and opted to start working and do courses to get specific qualifications or skills needed as they go along. Their aim in this approach is to achieve more financial stability and security at a younger age than the Millennials, whose home buying prospects were undoubtedly damaged and delayed by the global recessions of 2000 and 2008, as well as the more recent Covid19 pandemic. 

"The widespread acceptance of remote working, especially in the 'gig economy' they prefer, is also helping Gen Z buyers to gain faster access to the property market than Millennials did by buying in more affordable areas. They are no longer bound to a location close to a specific workplace, and they also benefited from the extremely low interest rates in the wake of the pandemic, as shown by the fact that more than 50% of buyers in 2020/ 21 were young first-timers."

Clearly, he says, Zoomers are generally more risk and debt-averse than Millennials, and for the real estate industry, that translates into paying bigger deposits if they can and taking smaller home loans, and into buying smaller homes that are well within their means.

"To meet this demand, we believe, developers will need to create more multi-use 'high-rise villages', Smart cities and live-work-and-play areas, where many of amenities that residents need and like are outside of their own homes, but easily accessible on a pay per use basis. These include gyms, spas, restaurants, entertainment and sports facilities and even co-working and business meeting spaces instead of home offices.

"There is also rising demand among young buyers for modern co-living units, where several owners share their kitchen, living and dining spaces in order to keep costs down, but also to maximise the use of those areas. And this preference ties in closely with another key characteristic of Gen Z, which is a strong focus on sustainable and eco-friendly living."

This generation, says Kotzé, not only has a great awareness of climate change, but is also determined to help limit its potential damage, if only by lowering their own carbon footprint. This will definitely drive rising demand for highly energy-efficient homes and communal housing schemes that are taking real action to protect the environment.

"And of course, because they are so tech-savvy, Gen Z home buyers will always be attracted by Smart home technologies to provide better security, remote monitoring and automation."