The Millennial Generation. Renting for Life or Home Ownership?
For many of us, our life goals revolve around getting an education, building a successful career, starting a family, and buying that dream home; perhaps a townhouse with a garden, or a modern loft apartment. Whatever your preference, owning your home is usually high on the list of priorities for most of us. For the millennial generation, those born between the early 1980s to the mid-1990s, the desire to own a home is still very much alive. A survey in the US has found that not only do millennials plan to own a home, but they plan to own multiple homes throughout their lifetimes: 68 per cent of millennials say their current home is merely a stepping stone towards the home they want to end up in, compared with 36 per cent of homeowners across all generations.
Despite this, and depending on where you live in the world, millennial home ownership rates vary considerably. In the UK, new research from the Institute for Fiscal Studies states, millennial home ownership rates have dropped from 73 percent a decade ago, to just 63 per cent today. For millennials, the ownership rate in the UK has collapsed even more noticeably, mainly due to fast rising house prices and slow growth in wages. In Germany, the proportion of the population who own their own home is just 52 per cent. However, here in the UAE, it is estimated that only 26 per cent of millennials are homeowners and among those who don’t, 80% intend to buy a home in the next five years.
As the statistics reflect, choosing between buying a home and renting one is a hard decision for many millennials living in the UAE. Purchasing a property depends very much on whether you are in a financial position to invest and there are several things to consider when deciding between renting and owning a home. Once you have made the decision of buying your home, it allows you to feel settled, opens up opportunities to generate revenue as a landlord, and also acts as a long-term financial investment that is likely to make you money.
Many a times, millennials find themselves in other financial commitments and therefore delay their decision of home ownership. According to recent report, many millennials are willing to consider making sacrifices in order to own their dream home such as reduced spending on leisure activities, delaying having children, buying with a family member or a friend in a non-preferred location that is smaller in size and also giving out one room for rent in order to be able to pay the mortgages.
On the one hand, renting makes sense for those who are looking for a short-term commitment, you can easily relocate should you change jobs, and there are less upfront costs when you rent.
According to property consultancy Chestertons, due to the increase in supply over the last 12 months, and the forecasted supply for the remainder of this year, more and more Millennials in the UAE are looking to take advantage of low prices and buying instead of renting. This is particularly true of the mid-market segment, an area that many developers are targeting with smaller-sized properties and lower prices. Due to the various payment options there appears to be an increasing number of tenants with the ability to become homeowners due to the affordability factor, something that hasn’t previously been an option for many millennials in the UAE.
Kaizar Patla, Head – Consumer Assets at ADCB said, “If you are from the millennial generation, like the previous generations, you have a decision to make when it comes to how you prefer to live. For those that prefer flexibility, renting often makes more sense while those who are looking for a more long-term investment option would opt to buy. The main deciding factor is often the state of your financial situation and whether you are in a position to make a long-term financial commitment. In order to achieve this, you should explore a mortgage solution designed to fit your individual needs.”
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