It’s 2016 and the real estate market should be prepared for the new wave of investors, the millennials aka Gen Y, who will become a major force in the consumption of real estate. Unlike baby boomers, homeownership for millennials is a desirable goal and an important measure of success, though affordability remains an issue.
This is the prime reason why buying a house is the last thing on their minds while they are paying their student’s loan. For as long as they are unable to afford mortgage and get a better offer, propertywise, millennials prefer living freely and mobile so that it is easy to move around.
Australian Social Demographer, Mark McCrindle, affirmed that millennials comprise 4.2 million Australians. This means that millennials comprised 20.5% of Australia’s total population. In terms of numbers, they are the country’s second-largest generation after Generation X.
Roughly defined as 20-34-year-olds, millennials have different purchasing habits and understanding their mindset is crucial to thrive in today’s real estate market.
What Millennials Look For In An Agent
Even though millennials are the tech-savvy, they still require an agent to help them understand the market trends, first- time property buyer do not mind hiring an agent and benefitting from the experience in pointing out unnoticed features and faults in a property to negotiate prices.
Most millennials hire the agent through referrals from friends, neighbors, or relatives, instead of considering 2-3 of them at once. In fact, 72% of millennial home sellers contact only one agent, which means they leave money on the table, in spite of knowing that there might be other agents with lesser fee and better services to offer.
A real estate agent’s reputation is most important to a millennial home seller. This is why Gen-Y carries out an extensive research before hiring an agent, which means that the agent must have a live and updated website. The website must also have reviews from satisfied customers. In short, millennials appreciate transparency in their dealings.
Additionally, it is essential to be Interactive and involved all throughout the process. By the next decade, Gen-Y will become the dominant force in the real estate market, changing the trends of the market, which could mean the overturn of traditional real estate models.
The Millennial Home Buyer
Millennial home buyers are not on the lookout for status, but are looking for an express lifestyle. Their abode must reflect their personalities and their lifestyle. They come to the housing market with a different idea of what impresses them.
Millennials are slow to move towards home ownership and are only drawn to real estate as an investment opportunity.
While some people between the ages of 25-34 years found that it would be 25% cheaper to buy a home instead of leasing or renting, results of a survey by the National Association of Realtors shows that 60% of the first-time home buyers face difficulty in securing a mortgage.
Most millennials prefer taking a home on lease due to the fact that most of them are underpaid and overworked.
With the rise in the median price of properties in Australia, and the average annual wage at around $75,000, more people are looking at home buying as an unattainable dream. For instance, if someone wants to buy a home in Sydney, then he/she must be earning more than $106,000 a year!
Here are some stats about millennial home buyers as recorded in the research conducted by the National Association of REALTORS.
- Gen-Y became the largest segment of home buyers at 32%.
- Even as first time home buyers, millennials boast of the largest share, i.e., 68%.
- 39% purchased a home only to fulfil their desire of owning one.
- Unlike GenX, millennials placed higher importance on the agent’s communication via. email and text messages, rather than personal calls.
- 31% of them prefer using mobile phones during their home search.
Where Do They Want To Live?
- Millennials prefer staying close to their previous residence, often within a distance of 10 miles.
- The younger they are, the older the homes that they tend to buy. Millennials are more likely to buy previously-owned properties, mostly because they find them reasonably priced.
- Their choice of neighborhood is one which is affordable and near to their workplace. In fact, they place such high importance on commuting costs that they are ready to forego the cost, size, and condition of the home purchased to stay close to their offices.
The Millennial Home Seller
Millennials are an active generation and because they are not looking to settle and always on the move. This is usually because of a job change or wanting to shift to a bigger and better place, their ideal home is something that they can easily renovate and sell or rent for good profit.
The National Association of Realtors also states that 75% of Gen Y sellers are first-time sellers as compared to just 8% of sellers in the Older Boomer segment and 11% of Silent Generation sellers.
The reasons for selling a home for millennials vary, however, for younger buyers a job change or shifting to a better are the real reasons.
Millennials and Commercial Real Estate
Millennials are entering the real estate industry as the agents of the next generation and this shift in real estate employment is bringing a real change to the industry’s workflow. The commercial real estate will witness a bigger impact, as it has been lagging in technology.
Even though the commercial real estate industry has come a long way from paper to online listings and mobile apps, millennials want more and are going to demand for more information.
This generation will also be pushing easier ways for seemingly small tasks while thinking along the lines of time- saving and accessing information easily. A majority of property tours will convert to online and mobile app on-demand scheduling with companies.
The Millennial Renter
Short-term rentals may be the key to coaxing this generation into becoming homeowners. Millennials traveling for work more than their older colleagues which is why it may seem more reasonable to rent. Hence, sharing services could allow millennials to use their primary residence as an investment property and make money while they’re away.
59% of millennials, aged 33 and under, have rented an apartment. According to the Fannie Mae survey, younger renters find down payments and credit score the top obstacles for getting a mortgage. Furthermore, existing student loans increase the problems.
The Fannie Mae survey also illustrates that majority of younger renters report having insufficient assets to cover a 5% down payment including closing costs on a typical starter home.
Attitudes have shifted along with credit availability for the millennial generation. For this generation, it is no longer a disgrace to rent and not own a home among their own age group at least.
While previous generations preferred nuclear communities, young people today want to live closer to each other in urban cores. They also want amenities and work to be nearby or at least easily accessible by public transit. That is why rental development is surging now and rental demand continues to climb.
Social media will continue to gain popularity as a medium to share articles and publish property listings or property requests. Online lead generation will rapidly change and outnumber referral-based client acquisitions. Millennials are the last generation to remember a life before the internet and it can be assured that they will not be going back to the dark ages.