Millennials are focused on the bottom line. Today’s first time buyers have to be. They increasingly see themselves as wealth creators. Surveys show that financial considerations are the number one reason to buy a property. In our post first time buyers invest in property we show the change in property spending from emotional and practical to almost purely financial.
The financial crash of 2007/8 which was started by the sub prime property market, has placed home owning under the microscope. Lenders and some buyers played roulette with people’s lives and much has changed since then. Borrowing is more regulated and buyers want to get it right rather than dive into the unknown.
Key Features Millennials look for
Millennials embarking on their home search are well informed and think creatively as they look for funding. Unlike some 30 years ago, they have the internet to shorten and sharpen the search process. Yet, job security – quite important when you tie yourself into repaying a loan for the next 25 years – is less secure today.
Employers are offering more short term contracts – and millennials are less rooted and more eager to change jobs regularly. Freelancing has become the norm. But a home is the one constant in the life for those who can afford to buy. It is an investment as much as a home. The rise in social media and sharing of interior design photos have also wetted the appetite for ownership among millennials.
First time buyers invest in property: Their Wish List
- Transport links
- Local amenities – particularly the social aspect
- Service charges or other variables attached to the property
- Outdoor space however small
- Entertainment space however small
- Smart home features
- Work space
Cool Heads: Fewer Millennials are buying
However, while today’s first time buyers are sharp with the budget, they are also older than previous generations of first time buyers. Property prices have risen sharply over the last 30 years – more than the average income and thus making it difficult to finance that first purchase. Creative thinking is required.
Millennials not buying Homes
Previous generations were lucky – opportunities to invest and build a property portfolio cheaply and quickly in the 1980 and 90s almost defy belief. Buy-to-let, 100% + mortgages, few questions asked and even fewer answers checked. Our post first time buyers invest in property reflects the change in property spending and lending from the late 1980s to now. As a result of that change, today’s levels of deposit or down payment required ranges from 5% – 40% of the agreed price.
It stops many young people from even thinking about property owning. The rise of the gig-economy has also shaken up the buying pattern. But things have changed for better too. Millennial have different choices and opportunities: It’s easier and cheaper to travel now with the arrival of budget airlines arrived. And the internet helps finding jobs which can be carried out on-the-go has revolutionised the way we are now able to work and travel at the same time.
5 Good reasons for millennials to make the shift from renting to investing in property
- Financial – to have an asset and create wealth while interest rates are at historic lows, tax advantages
- Power over their home – the ability to make decisions on upkeep and personalise decor
- Peace of mind – being the one to decide how long they stay and when to move on
- Social – having a vested interest in the neighbourhood and a sense of belonging to a community
- Emotional – a sense of responsibility and pride
Some are scared by negative property news, volatility in the market which affects interest rates and the legally binding commitment it is to own a home. In times of change and uncertainty, commitment can be a red flag to some. Others will see it as an opportunity: appreciation and potential rental income. Perhaps the greatest obstacle home buyers face is the deposit. This is particularly tough for first time buyers and millennials with fewer savings and student loans.
Cool Heads – Delayed Marriage pushes back buying Decisions
Fewer millennial homeowners adds pressure on the rental market. Demand for rental properties grows, prices are pushed up. Delayed marriage has also pushed back home ownership among millennials – settling down later in life means there’s less need to find somewhere steady to live. Many millennials focus on education, travel or enjoying a flexible lifestyle with fewer strings.
Twenty-somethings and 30-something flat-sharers have grown up with mobile phones, flat screens, portered apartment blocks, health and safety regulated furniture and even cleaners. When their parents were their age, they were popping coins in phone booths – when they could find one – rather than whipping an iPhone out of their back pockets.
And they drank instant coffee – black or white – those were the only choices. Times change, but the one constant is home ownership. It’s a comfort. Paying back a loan makes more sense than paying money into someone else’s bank account. For more tips on what to look out for when buying a home read also our blog First Time Home Buying: What to Ask Estate Agents.