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Fewer households to be created, thanks to recession

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The pace of new household formation is likely to slow during and shortly after the current recessionary period, constrained by a lack of job creation and widespread household financial pressure.

This, says John Loos, FNB’s commercial property economist, is likely to dampen tenant demand for residential rental property.

In addition, low-interest rates may be working moderately in favour of home buying and against renting, further constraining growth in rental demand.

Other reasons for the delay include young people hoping to get into the labour market having difficulty finding jobs due to declining job creation.

This means instead of having a salary with which to enter the rental market, many could choose to remain in their parents’ home for longer.

Even those who are working might continue living at home until the current highly uncertain times pass, Loos says.

He adds that people might also merge their households to share living costs. More elderly people will also, move into their children’s homes.

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