Consumer habits backed by spending power drives change. For that reason, the motivations and spending practices of millennials have increasingly become part of any market outlook or forecast. From their dining habits to where they prefer to live & work, the demands of this wealth-accumulating consumer class have radically shaped industries. From this demographic trend, current and future property markets are undergoing radical change.
Who exactly are the millennials, and what sets them apart? Born between the 80’s and 90’s, they represent the largest cohort of a generation. They have grown up during a period of globalisation, rapid digitisation, and economic integration. As such, they value immediacy and functional digital spaces. As far as investment is concerned, they are waiting longer than previous generations to purchase a house and get married.
How do they interact with the property industry? The average millennial’s tech-savviness and international-facing mindset make them more willing to adopt/utilise online aggregators, accelerated overseas investment, and the Environmental, Social, and Governance (ESG) standard.
Millennials, now between their late 30’s and mid 20’s, fuel the demand and success of online solutions. More so, their connection to a massive online community with free-flowing information, and their exposure to different lifestyles and solutions have made them more demanding, exploratory, and impatient.
Most millennials are comfortable taking investment advice from the Internet. Whether it’s market research or actual house hunting, the use of online aggregators has become a crucial element of millennial investing. If a brand lacks a digital presence, it is unlikely that it will win out against a competitor with a strong online portal and lead generation.
As investors increasingly depend on online sources, companies should realize the necessity of building their brand online, lest they lose their existing competitive edge.
In Hong Kong, homeowners represent a shrinking minority of the population. Even in 2017, only 49.2% of Hong Kong households owned the property they lived in. Comparatively, Singapore’s successful government housing initiatives have brought homeownership above 90%. Understandably, young and mid-career professionals view the local market with unease. In addition, moving out of the family home is not seen as a barrier to adulthood, rather, something more considered before marriage and settling down seriously with a partner.
Yet, purchasing property for investment has never been more popular. News from friends and relatives from overseas who have experienced comparatively dirt-cheap prices have pushed more people to look abroad. For example, HK $1.8 million can fetch a 600-sq ft, two-bedroom flat in downtown Brisbane, which can quickly be leased out to a high-demand market. Meanwhile, a similar 604 -sq ft flat in eastern Hong Kong at the Kornhill Development sold for a whopping HK$10.3 million in early 2020.
Combine this with the strong performance of the Hong Kong dollar during the pandemic, and it is no surprise that Hong Kongers, millennials, and otherwise, are looking abroad for property investment. Since the pandemic, Jonathan Benarr, director of APAC at international property portal Quintessentially Estates, and his colleagues have seen an “over 300 percent increase in client requests for buy-side support,” with main cities of interest being “Sydney, London, and Lisbon.”
ESG – Environmental, Social, and Governmental
On top of online aggregators and overseas investment, millennials are making investments more green. In a report on the impact of social good on real estate, Deloitte describes millennial investors as individuals who make sure their properties are “aligned with their intended positive social impact.”
Investors of this generational cohort are formally educated and have a personal stake in social, environmental, and governmental concerns. Asset prices reflect this as “greener” projects promise a higher yield and premium. This is encouraging for asset managers, as new practices in development have enabled green buildings to see a 30%-80% reduction in utility costs.
All in all, Millennials are reshaping real estate, and companies must adopt new ways of doing business to cater to their needs. These changes are here to stay, and the application of digital technologies are quickly replacing traditional methods.
Are we right in emphasizing the growing reliance on online aggregators, overseas property, and ESG components? Let us know in the comments below Real estate companies in all molds best stay in tune with events and trends of the millennial investor. Are we right in emphasizing the growing reliance on online aggregators, overseas property, and ESG components? Let us know in the comments below!