Real estate spending is expected to change over the next five years as millennials start to buy into the property market in earnest.
Until now those born between 1982 and 2002 have been more focused on lifestyle trends like travel, eating out and city socialising, however, the time for settling down has arrived. While those big milestones for commitment and family might have already come and gone for generation X and Y when they were this age, the millennial generation are now coming into their own. Trends are showing that rather than spending big on walking down the aisle or starting a family, they are putting down roots and saving to buy their first home with many expecting to buy in the next three years.
While a lot of talk has been around first home buyers being priced out of the market with escalated property prices, particularly at auction, part of the problem has also been that this particular generation has had a financial focus on the ‘here and now’ rather than long-term investments. While property prices are up, millennials earn significantly higher wages than generations past, giving them options to save and invest if they wanted to.
With a financial shift from trendy lifestyle to settling down on the cards the millennial impact on the property market is expected to be big, so much so that they might even eclipse the spending power of baby boomers if the anticipated 66 per cent of new buyers comes to fruition.
Add to this that many millennials have access to extra assistance. While money might not be a problem, channelling it and understanding it as a resource seems to be, with a staggering 74 per cent of the new generation requiring assistance in understanding how to buy or relying on family members for financial help with deposits or guarantees.
While some were not able to say how much deposit they would need for a home, those who did were happy to answer that the average required home deposit was 20% of the purchase price. While some might require more help on saving for a deposit or understanding the process of how to save, those that have access to financial assistance are getting massive benefits. Family assistance enables more millennials to afford a bigger deposit and therefore a wider range of choices. Early figures suggest that some of these first purchases will be in the range of $500,000 to $750,000.
Those wanting to keep the hipster lifestyle can opt for inner city suburbs, close to work and café’s in an apartment or studio, keeping their lifestyle close to their heart. This investment will, in turn, be a helpful asset when they look to a more family friendly home after six years or so, a significantly shorter stay in a first home than past generations who averaged ten years before an upgrade.
Those looking to start a family faster are heading to the suburbs already. Heat maps of current purchases show that millennials buying in the suburbs are purchasing three-bedroom homes or bigger and are happy to commute an additional hour, forgoing the city lifestyle in favour of more space and some green leafy surrounds.
One factor that is important to millennial buyers no matter where they buy is connectivity. There is a lot of emphasis being placed on internet speed and the available range of telecommunication providers as well as an increased reliance on internet searches to help narrow down home buying shortlists. Staged rooms and picture-perfect properties are seeing more traffic and those homes that need a little care and attention are being overlooked.
It seems too that lifestyle TV shows that feature home renovations and interior design are also influencing buyer decisions with homes that are modern and showcase styling trends favoured over traditional or neutral looking interiors.
It’s an interesting and exciting time to look forward to as new money is injected into Melbourne real estate by first home buyers looking to take big steps and achieve big milestones in their life.
Parley Property Advisory