Millennials, defined as those born between 1980 and 2000, are stereotypically characterised by their vast student debts, lower salaries and hipster indifference. However, they’re also dubbed ‘Generation Rent’, and are accustomed to being written off as unlikely property investors. This is largely at odds with their predecessors – Generation X and the Baby Boomers. Yet recent figures refute the convention that millennials are not interested in homeownership. With new statistics surfacing, we decided to investigate the current state of play in the property market.
There are 80 million millennials in the US alone. Over a lifetime, their collective buying power is forecast to reach £10 trillion. Additionally, the financial burdens of Generation Y, as this group is also known, are considerably lower than commonly perceived. Millennials owe less than Generation X’s $28,000 per person on student loans, with an average debt of $25,000. The National Association of Realtors also found that they led the property market in 2015, with a 35% share in purchases. A Royal Bank of Scotland survey, by contrast, found that 47% of Generation Rent feel trapped in a cycle of long-term letting in the UK, while 69% said they will need another five years to save for a deposit on a house.
Choosing to move out
Millennials tend to rent in urban areas in the US. Yet when it comes to buying, they're moving to the suburbs. Properties tend to be less expensive outside of the larger cities, where just 17% of Generation Y bought homes in the last year, according to the National Association of Realtors. The trend reflects the demographic’s desire for additional space, in part explaining why the group is searching for older, single-family properties.
Compared to the Baby Boomers, millennials are delaying marriage and parenthood by up to a decade, allowing them time to strengthen their careers – and earning power. This generation are also far more flexible than their older counterparts and aren't necessarily aiming to purchase their ‘forever home’ when they sign up for their first mortgage. They're ready to switch and change when needed; they don’t expect a job for life, nor do they view a home in the same way.
The decision to rent
A sizeable proportion of millennials continue to reside in metropolitan areas, favouring the convenience and recreational opportunities city life brings. A Nielsen survey found that 62% of millennials “prefer to live in dense, diverse urban villages where social interaction is just outside their front doors”. In order to afford this lifestyle, Generation Y has no choice but to rent.
However, there are other factors at play. The necessary upkeep, as well as having to shoulder the responsibility of selling, discourages a number of millennials from owning a house. Those who saw their parents struggle with repayments or repossession during the economic downturn of 2007 to 2009 may also be wary of purchasing a property. Rents are steadily rising, however, meaning an increasing lack of security may encourage more millennials to buy homes.
At Engel & Völkers we're well placed to assist millennial homebuyers aiming to rent or purchase a property. Understanding the needs of our customers is at the core of our business, and with agents in 36 countries, we can help members of Generation Y across the world make informed decisions.