Why Millennials prefer to Rent
Category Market News
The demand for rentals among millennials is on the increase, and it's easy to see why. In Deloitte's 2018 Millennial Survey of over 10 000 people born between 1983 and 1994, the research found that freedom and flexibility were key workplace priorities for this age group. But this could be extended to the world of property too: because of this desire to have more freedom, millennials tend to settle down later and travel more, which means they're renting rather than buying.
Property prices have also increased across the board, making home ownership increasingly unaffordable for younger generations. Recent research from Momentum Corporate backs all of these findings up, stating that only 40% of millennials are interested in owning a home, which is a figure that's much lower than previous generations.
As a result of all these trends, property professionals (estate agents, developers and landlords) need to target those in this rental market more effectively. But how? Here are five things you need to bear in mind about millennials when it comes to property rentals:
1. They want freedom. Many millennials are choosing to live much more transient lives. They want to travel and live in different countries, cities or suburbs - so rather than being pinned down to one property in one place, they'd rather enjoy the freedom that renting offers, compared to the responsibility that comes with owning a house. With this in mind, property professionals could consider offering them shorter term leases (say one year instead of two or three). On the other hand, the properties themselves should be conducive to a "lock up and go" lifestyle, where they're easy to maintain and leave for long periods of time if they renters are off travelling.
2. They're digital natives. Millennials are completely comfortable transacting and communicating online, especially through their mobile devices. Especially if you're an estate agent, consider this when marketing or communicating with your millennial clients: the rental property needs to be easy to access (e.g. via social media) and to visualise online (e.g. beautiful images on Instagram or virtual tours).
When it comes to engaging with a client, Whatsapp has augmented how we communicate. Proptech companies such as Flow are taking this one step further. Flow's mobile based app allows tenants to get rewarded for registering, adding their property details, paying their rent on time, looking after their homes, etc. For these rewards, Flow has struck partnerships with a number of leading brands in the lifestyle, entertainment, homeware, fashion and travel space which are valuable in the lives of millennials. Tenants that are fully in Flow can get up to 20% of their rent back in rewards every month.
3. They're part of the "sharing" economy. Dion Chang of Flux Trends says that apps like Uber and Airbnb are driving the idea that you don't need to own something to use it. With millennials being more transient, and having more varied ways of earning an income, being able to rent their apartment or house out on Airbnb is likely to be a priority for them. As an estate agent or developer, will your apartments allow for this kind of "sub-letting" arrangement?
4. They're more environmentally conscious. As the global eco-consciousness movement grows, millennials are becoming more aware of this than ever. They are reflecting this in the way they live - for example by living in "greener" spaces that are more energy efficient. Landlords need to take this into account by looking at how "green" their property is: make recycling easy to do, utilise energy efficient lighting, and install rain water tanks to collect rainfall if the property has space for it. Consider things like solar panels, timers on geysers and a plumbing system that reuses grey water. These will also add value to the property.
5. They have less money. With the cost of living and inflation continually increasing - not to mention the fact that South Africa is in a recession - this means that the younger generation has less money to spend. For this reason, budget will be top of mind, which may mean smaller, more compact apartments, or multi-room apartments where they can comfortably share with roommates and split the rent. They may also be willing to look at areas slightly further out of the most highly desirable locations in order to save on rent.
In the past, the rental market has typically been overlooked in favour of those buying homes by property professionals. But as a result of this growing trend, we're seeing a huge organic growth in the rental market - both in South Africa and globally among millennials. If you can adapt your marketing and sales strategy to capture this younger generation, you should see positive results, even despite the depressed economy.
Author: Catherine Black