“Generation Rent” brings opportunities for property investors

Private Property South Africa
Cathy Nolan

Recent recessionary times have brought about more than a depressed property market: the state of the global economy seems to have influenced an entire generation’s opinion on home ownership.

Indeed, international estate agency Engel & Völkers has even named this investment-averse sector of the population: Generation Rent.

As background, the generation previous to the renters is popularly known as X-ers (those born between 1968 and 1981, plus minus). X-ers will typically work more 10 or more jobs in their lives compared to the three of their parents’ generation. However, their goal remains the same: home ownership.

Job-hopping Generation Rent seems to have a different vision, believing that home ownership is more of a burden than a blessing. Many have witnessed the emotional trauma and financial repercussions caused by foreclosure. Additionally, in today’s buyers’ market, not many of them have seen their homes increase in value over the years to the point where they could pretty much demand – and receive – a fantastic selling price.

Generally, Generation Rent believes that renting is more sustainable and not as risky as owning a house. From a lifestyle perspective, it offers the freedom to lock-up-and-go. An extended holiday is not going to impact on home maintenance as this is the landlord’s responsibility. Being able to uproot quickly also offers more flexibility in terms of work opportunities.

Of course, it’s possible that this attitude may be less of a desire for minimal responsibility and more of a perception that the barriers to home ownership are insurmountable. Recent research by Privateproperty.co.za in partnership with Columinate shows that the more stringent terms being imposed by banks are the top stress factors in the property purchasing process.

Despite South Africa’s interest rate being at a 10-year low, the country does not generally have a “saving culture” and many younger people struggle to come up with the down payment that banks now require before granting a bond. Widespread job uncertainty also forces most to think twice before committing to such a major financial responsibility.

Inherent in this situation, however, lies great potential for those who can afford to purchase and maintain multiple properties for leasing out.

Perhaps the biggest risk in this scenario is that tenants are not adequately screened and either default on their payments or damage the property. But this, says Adrian Goslett, CEO of RE/MAX of Southern Africa, can largely be ruled out with the assistance of a suitably qualified letting agent.

He advises that, just as choosing the right tenant is important, ensuring that the right agent is in charge of your asset is also vital.

While all real estate agents should have the required qualifications to sell property as well as handle lease agreements, it is advisable for landlords to utilise the services of an agent who specialises in rentals. The laws surrounding the rental process and how they affect the relationship between landlords and tenants have become far more intricate in recent times and a good rental agent will help to negotiate a situation this is both lawful and in the best interest of investors and Generation Renters.

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