They are sometimes called “generation rent” for obvious reasons. In almost any other conversation, they are millennials, that massive segment of the population that is generally known to be extensive users of digital technologies and social media. Millennials are also more likely to be tenants as opposed to being homeowners.
The proclivity for leasing is a trend that is common among millennials around the world, although this was not the case a few decades ago. In the UK, for instance, home ownership was the norm for those in the 25-34 age bracket. “According to the Institute for Fiscal Studies, in 1995–96, 65 per cent of those aged 25–34 with middle incomes for their age owned their own home,” explains William Page, sales director of SevenCapital, a real estate investment and development company. “Twenty years on that figure was just 27 per cent.”
Further research by UK insurer Direct Line indicates the trend will be sustained, at least for the medium term. “[The Direct Line research] suggests that 70 per cent of those currently renting in the UK have no plans to buy a property in the future, with 22 per cent claiming that they don’t want to be burdened with the financial commitment that comes with owning a home,” says Adam Price, managing director of Select Property Group Middle East and Asia. “Nine per cent want to remain free to travel and 8 per cent don’t want to be tied down to one area.”
This trend is echoed in the UAE where only 26 per cent of millennials own a home, according to an HSBC study last year. “It’s a similar story in the UAE,” says Page. “While most millennials could afford the mortgage repayments, saving for the deposit for most is the stumbling block.”
The HSBC study also revealed that collectively, the percentage of millennial homeowners in Australia, Canada, Malaysia, UAE, UK and the US is less than 40 per cent.
“While to previous generation people this may seem bizarre, when you consider the independent, and often, transient lifestyle of this generation, it starts to become clear where this thinking is cultivated,” says Price. “Of course, here in Dubai, the cost of property makes it difficult for the younger generation to ever dream of buying a home. However, the city provides a good example of a need for flexibility, with most of the population made up of expats who don’t necessarily plan to spend the rest of their lives here.”
Predictably, real estate developers and investors are catering to the demand. “This is a market that can prove extremely fruitful for landlords and property investors who, provided they own a good rental home in the right location, will benefit from a constant stream of professionals and families prepared to pay the price to live in their property,” says Page.
However, Page also notes that an uptick in buying activity among millennials could happen within the next half decade. “The desire for home ownership, however, tells a different story, with the proportion of millennials hoping to buy in the next five years in most countries sitting about 80 per cent,” says Page, again citing the HSBC study. “That’s provided they can save for a sufficient deposit.”