Millennials, also called Generation Y, are a misunderstood generation. They’ve been ridiculed for demanding better working conditions and higher wages, as well as for investing in experiences rather than material possessions. Intriguingly, there has been much disagreement even about the exact definition of a millennial. Some experts have pegged millennials to be those born in the late 1980s to the early 2000s. However, the Pew Research Center has clarified that millennials refer to individuals born between 1981 and 1996.
That means that the youngest millennial is turning 25 while the oldest millennial is turning 40 this year. Even more importantly, millennial Australians are overtaking Baby Boomers in the workplace as the latter generation retires. This demographic shift is bound to alter businesses expecting to employ more millennials and businesses that have to advertise and sell their products or services to Generation Y.
The millennial generation is said to have ignited the “Experience Economy,” which refers to the trend of consumption going from products to services to experiences. Then again, that doesn’t mean that only millennials are opting for experiences over things.
This shift has been noted across various generations as the major indicators of happiness and wealth have also changed from material to experiential. Does that mean that millennials are just not interested in houses and cars anymore? Not really. Studies show that housing affordability is the top reason for millennials’ inability to buy houses or the significant delay before acquiring their first homes.
However, now that millennials have become the dominant demographic in Australia and across the world, real estate investors should take a closer look at the needs and wants of this generation.
What are barriers to homeownership?
Millennials are interested in land for sale. There are just so many reasons they can’t—or couldn’t, considering recent and forthcoming accommodations from the state and private investors.
One obvious barrier to buying a house is the steep price of real estate. A higher price requires a higher initial deposit, so it’s no surprise that young Australians have difficulty saving up for a property. Also, consider that most of those who lost their jobs in the pandemic are under-40s who work in the hospitality, tourism, and food and beverage industry. Unemployment hinders young buyers from obtaining loans and mortgages for housing.
What has changed among millennials?
As mentioned previously, millennials are now composed of adults in their mid-20s to early 40s. That means that most older millennials have had enough time to work and save for a house. In fact, because many millennials are now of the marrying and childbearing age, their priorities have also begun to change. As millennials get married and have kids, the need for a space of their own rises. In relation to this, houses with more rooms will be in demand soon.
Even if millennials don’t settle down, there will still be a growing demand for housing. That’s because the COVID-19 pandemic has compelled people to work from home indefinitely. As a result, millennial buyers will desire an exclusive working space and a garden for entertaining guests and unwinding. The WFH or hybrid working setup might mean lesser demand for lots in the city, so the suburbs will be a hot destination for millennial employees.
What has changed in the housing market?
As of today, the Federal Government has acknowledged and responded to the hindrances toward millennial homeownership. Specifically, they offered cash assistance through the First Home Loan Deposit Scheme and HomeBuilder. This scheme has halved the required deposits for housing, allowing younger people to finally afford their first homes.
Lower interest rates for housing loans have also made it possible for the regularly employed to grab the chance to own residential property. Additionally, rent in cities like Sydney and Melbourne has significantly declined lately but will probably rise again as people and policies adjust to the pandemic. Hence, the unchanging difficulty of affording rent in urban locations will push millennials toward owning houses.
What is rentvesting?
Because simply buying a house and lot in the city is still impossible for most millennials, they’ve turned to a new housing investment strategy. They buy a house in regional areas, rent it out, and keep their city rental space their primary dwelling. For many millennials, this is the only way to enter real estate investment without the hassles of full-blown homeownership.
So, millennials are likely to buy their own houses soon, most likely in the suburbs. They’ll also want more rooms since they’ve started their own families. They will innovate and invest, but many still need help in affording deposits and housing loans.