5 property market decision factors for millennial buyers
Like several other facets of their lives, the millennial generation is massively misunderstood on the property market. The problem remains that nobody has a conclusive solution to this, and the property market is no different. However, the assumption that young millennials are less concerned about owning real estate ranks above all the other biggest misconceptions. Because they do, especially after moving out of their parents’ houses. Even more so than the previous generations.
In fact, it could be argued that the reason young millennials are viewed as less interested in real estate ownership is because of the biased light within which these young adults are considered. And the costly nature of real estate transactions. This is because research has determined this generation to be the first to seek homeownership while young. In some cases, even the unmarried young millennials are already ‘proper’ homeowners.
As with everything else, this view is distorted by the fact that young millennials are being judged by already established people seeing the new state of affairs from an older perspective, albeit one not so wise.
Millennial property market
Kenya, like most other countries around the world, is approaching an exciting conundrum. While the hype surrounding property ownership rumbles on at full speed, the number of persons actually considering investing in the real estate property market is much bigger in every age group than the corresponding numbers a few years ago.
So what direction is the Kenyan real estate market headed to? And what drivers influence decision making in the industry?
Property Market Tip #1: Individual choices and preferences
Granted societal customs still hold true, but to a young millennial, personal choice is just as significant. The deciding factor in whether a young millennial buys a home is no longer about family needs.
Today, young adults take risks and push themselves to afford such affluence, even resorting to mortgages to achieve the said dream. This was unheard of previously. The 28-year old young millennial home property seeker is also more unconventional compared to the previous generation.
Where marriage was previously a be-all for young adults, it is not with today’s youths. This could be attributed to several factors. The net effect of this change has however benefited property sellers. Whereas previously people sought families before considering the purchase of a permanent home, young millennial youths are increasingly open to acquiring larger houses even if they don’t have the family yet. This pool of would-be real estate buyers is therefore bigger.
The only black mark, however, is that non-married, young would-be home buyers are more prone to procrastination than their grown-up counterparts. Unlike a 50-year old family man, buying a 4 bedroom permanent residence is a luxury want to a 28-year old unmarried man. And one he can certainly do without.
However, insinuating that young millennials are reluctant to settle down is barbaric. The difference is that settling down has nothing to do with buying a house. And this position is backed by the prevailing rental yields of about 3-4% in major employment centers such as Nairobi, Thika, and Nakuru.
Property Market Tip #2: Market Disruptions
It would appear an unmissable occurrence, but the local real estate market is continuously undergoing seismic disruptions to the established norm.
Besides the tumbling average age for homeownership in major cities, the biggest such disruptions emanate from systemic lifestyle changes that potential buyers have taken on. This includes the way in which young millennial would-be buyers work, how they move about, as well as changing eating habits and even recreation trends.
It follows then that this paradigm shift in lifestyles impacts the property investor psychology such that certain housing characteristics are sought or preferred. One key outcome of this shift manifested in the younger generation seeking rental or to-buy properties in cities not traditionally associated with their age groups.
Property Market Tip #3: Homeownership aspirations
Young millennials are moving to urban centers in search of bigger opportunities. Whether for employment, education or other forms of development, professional students and other young workers are scaling up to better residences.
Population studies show that homeownership remains a universal ambition across economic classes and social divides, creating a sustainable market for residential properties in places like Kisumu and Eldoret.
The cost of any given property depends on a selection of actors, however, with location and size among the most prominent.
While prime business areas like Nairobi and Mombasa remain the dream, one’s educational background and or economic situation still determines what they can afford to buy. In fact, this does not even account for potential pressure from one’s peers or even parents.
Property Market Tip #4: Changing times
Local homeownership is changing with the times. Younger Kenyan consumers are moving from one city to another due to varied reasons, and with it, the demand for houses in the recipient cities is on the hike.
The only difference is that today’s youths start making money much earlier than previous generations, and have multiple opportunities to access credit. In effect, younger adults can afford decent rental residential houses, or even buy one. At much earlier ages than the current senior generations, making the latter’s judgment a little miscued.
And the stats tell the real stories. 10 years ago, the average age of a home buyer was 42 years. Today, that number stands at 28. A decade ago, most 30-somethings were junior employees, today a 30-year old is much closer to senior management positions. Indeed, even marriages are easily delayed in pursuit of career advancement, something unheard of among the previous generations.
And for young homeowners…
Similarly, young millennials enjoy better tenure security by working multiple jobs at once. This makes it easy to realize one’s dreams early. And of course, there are those who prefer renting to buying and vice versa.
The point is that young millennials have more options on the property market than anyone who came before them. And judging this generation from the periphery is a show of unguarded bias.
The concern, therefore, is that while there is an evident will to buy property in some of Kenya’s largest urban centers, the ability is not easily recognizable. This has been attributed to a few factors, both economic and consumer-specific, but it remains that the decision to make such a financial commitment is shrouded in a maze of decision factors that do not bode well for the market.
There are concerns, however, that the local real estate market has more individuals willing but not able to buy real estate assets in major cities. The upside, however, is that the average age of the willing homebuyer has fallen drastically from 42 years to just 28 in just under 10 years. The difference is that these willing home buyers have more time that previous generations to act on their desire of buying permanent homes.