Big changes coming as Boomers embrace renting

Baby Boomers, born roughly between 1946 and 1964, have been the poster children for home ownership since the mid-1960s, when the whole world was enjoying post-war economic expansion, affordable housing and favourable lending conditions, and they are still the biggest cohort of residential property owners in many countries.

But in a seismic shift, they are rapidly losing their devotion to ownership and turning to renting in significant numbers.

For many Boomers, real estate has been their primary method of building wealth, with the homes, holiday homes and rental properties they own having shown tremendous value growth since they bought them decades ago.

However, as recent events in Cape Town have clearly revealed, the high net worth that Boomers may have as a result of their long-term real estate holdings does not necessarily equate to high incomes. In fact, many are what has been aptly termed "house rich and cash poor" as they continue to live in upmarket homes that make them look wealthy although they are in fact finding it increasingly difficult to afford their everyday expenses, not to mention the rising costs of healthcare, home maintenance and property taxes.

This is especially true for those who have decided to age in place rather than downscale to smaller and less costly retirement homes, but now only have their fixed pensions or retirement savings to live on. And it explains much of the outcry among high-end homeowners when the City of Cape Town recently proposed tariff reform plans, including a rates increase of almost 8%, that would result in the average municipal bill rising by around 20%.

Deeds Office figures show that more than 70% of current homeowners in Cape Town are over the age of 50, with half of those being over 65, so it is reasonable to assume that a fairly large percentage of owners are retired and living on reduced if not fixed incomes. And with the average home price in Cape Town sitting at R2,1m currently, it is also safe to say that many of these residents own properties worth much more than that, in the city's most affluent areas, and would face the biggest increases in municipal service charges if the tariff reform proposals were approved.

However, it is unlikely that they would be able to afford these hikes unless the City made major concessions, and several ratepayer organisations have already noted that they would most likely be forced to sell and either buy less expensive properties or opt to rent, as increasing numbers of their generation are now doing all over the world.

A common concern among these Boomers is the affordability of property ownership as they age, especially if they lost money during the Global Financial Crisis of 2008 or during the Covid-19 pandemic. Many also just don't want to manage or maintain large properties as they age. They would rather rent and let someone else take on those responsibilities. 

In addition, many Boomers are realising that freedom from property taxes, insurance, upkeep and security costs enables then to do more of what they really want to do in their senior years, such as travel, see more of family, explore new interests and even relocate. And selling a large family home can free up even more cash for these pursuits, as well as general living expenses and a possible increase in healthcare costs.      

Of course this has major implications for the residential property market going forward, the most significant being the fact that developers can expect to see a steady increase in demand for investment units in independent living communities and 55-plus rental developments featuring single-level homes that are accessible and safe for seniors.

With more older adults renting, this sector of the market will also no longer be dominated by young professionals, and this may well influence marketing strategies and lease terms as well as property design.

In addition, Boomers competing with younger renters is likely to contribute to low vacancy rates and rising rents, especially in desirable and walkable urban and suburban areas that are amenity-rich and enable seniors to stay active and social.