Millennials are the first truly mobile generation -they shop and socialise online, embracing all that digital native life has to offer.
It’s no surprise they do things differently to previous generations and in the latest McGrath Report, real estate doyen John McGrath explores how the largest portion of Australia’s population:
- Think about homeownership
- Tackle the challenge of affordability
- Have reset the boundaries of property search and what’s important
Here's what the report had to say about Millenials...
Millennials are the first truly mobile generation – they shop online, work online, and socialise online.
Digital platforms including social media are giving them the ability to connect with information, people, and ideas at a pace generations before them never could.
Born between 1980 and 1994, millennials are aged between 27 and 41 years.
Also known as Generation Y, they make up the largest proportion of Australia’s population at 22% and account for 35% of the workforce today.
Their mastery of technologies means millennials are increasingly using digital tools to assess the property market.
They rely on apps and social media to find everything from properties for sale to financing options.
U.S. research shows that 92% of millennials frequently use the internet to search for homes.
Although no similar data is available on Australian users, there is evidence that Australian Gen Ys are equally reliant on technology to meet their real estate needs.
Tellingly, there is more focus than ever on ‘proptech’ or property technology in the local real estate sector today.
There are now 381 proptech companies in Australia, with the majority entering the market in the past five years.
A survey of 216 Australian property companies by the Property Council of Australia shows the COVID-19 crisis has accelerated proptech adoption.
Amongst Australia’s 200 top-grossing apps is domain.com.au ranked at 119 and realestate.com.au ranked at 132.
Although millennials are often maligned as ‘entitled’ and ‘lazy’, they are actually hard workers and savers.
Many entered the workforce during the GFC and many were in the middle of their careers when COVID-19 struck.
It’s no surprise that millennials do things differently from their parents.
They delay marriage and children, they spend more years studying and they do more part-time work.
It is also common for both parents within millennial families to work to help service their mortgage.
Goals around property ownership have shifted, too.
House prices have increased at a much faster pace during the lives of Gen Ys, but they are also earning more than their parents did.
Australians aspiring to buy their first home take an average of 8.6 years to save a 20% deposit, and this marathon savings hurdle represents the highest barrier to homeownership.
Affordability has made the Great Australian Dream a challenge for millennials.
In May 2020, the Australian Housing and Urban Research Institute published research showing that homeownership was expected to drop to just above 50% by 2040 – down from 60% in 1981 – for households in the 25-55 age bracket.
But true to form, millennials are finding ways to adapt.
Many are increasingly turning to the Bank of Mum and Dad for help.
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They are also ‘rentvesting’ – buying an investment property instead of a home first, usually in an affordable outer-ring suburb, whilst they continue to live in an inner-city or beachside rental apartment close to their CBD jobs and the best cafes, restaurants, shops, nightlife, and entertainment that our big cities have to offer.
In recent years, millennials’ ability to fund their first home has been assisted by generous government grants and stamp duty concessions in NSW, Victoria, Queensland, and the Australian Capital Territory.
This has powered high levels of activity.
In FY21, enhanced government incentives coupled with three interest rate cuts in 2020 due to the pandemic kept first home buying going throughout the entire first year of COVID-19.
Lending to first home buyers as a proportion of total lending to owner-occupiers rose from the decade average of 24% in March 2019 to 30.4% in March 2021, before tapering to 27.7% by June 2021 due to affordability constraints.
The prevalence of working from home is also allowing millennials to reset the boundaries of their property search away from pricey inner-city districts to metro or regional suburbia.
Social demographer, Bernard Salt says the virus has brought forward the demographic shift of hipster millennials, who gravitated to inner-city apartments in their 20s to pursue their careers and are now leaving these areas ahead of their time.
Known for being a nimble generation, young family millennials, in particular, are joining the VESPA movement (Virus Escapees Seeking Provincial Australia) and moving away from the city centres.
Some are leaving the capital cities altogether for regional areas that not only offer affordable housing but also an escape from traffic and a time-poor, big city lifestyle.
Today’s white-collar workers can live anywhere with reliable broadband and the NBN is expanding its options.
Millennials are relishing the chance to genuinely design their own lives, which includes buying a ‘grown-up’ house where they can put down roots long term.
This is giving young millennial families the chance to provide their kids with the same ‘luxuries’ they enjoyed as children, such as big backyards and their own bedrooms.
The latest data reveals that people aged 25-44 years are the second-largest age cohort leaving capital cities, behind the 45-64-year-olds.
There was a net loss of 11,845 people from the capital cities in the March 2021 quarter, the largest quarterly net loss through internal migration on record.
Sydney and Melbourne led the trend and lost a net 4,520 millennials during the quarter.
Regional NSW and regional Victoria experienced the largest net gain in millennials.
Millennials' love for travel is well-documented.
For many, it’s a rite of passage to study or work overseas before settling down back home.
Such is their desire for travel that Gen Ys took more overseas trips in 2019 than all Australians took in 1997.
For now, their wings have been clipped by COVID-19, and in a survey of more than 1,000 Australians, McCrindle researchers found 63% of millennials are prioritising saving.
This is resulting in many taking aims at homeownership sooner than they anticipated.
An ING survey of 2,000 Australians found 59% of millennials were are redirecting their travel savings into a home deposit and one in three (32%) are planning to buy a property within the next two years.
Homeownership is still an important goal for tech-savvy millennials.
Whilst many face uphill battles during the pandemic, especially those still studying or just starting out in their careers, it will doubtlessly make them even more resilient.