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Priority shift: Millennials set to favour property over lifestyle

Millennials, young adults, property over lifestyle

Millennials are often described as lifestyle-focused, but a real estate executive predicts this will change within five years as Millennials enter the property market.

According to First National data, 74 per cent of Millennials currently require “more help than usual in understanding the buying process”. Despite this, 66.1 per cent of Australians born between 1982-2002 will choose property over lifestyle.

First National Real Estate Australia CEO Ray Ellis said that the next five years will see Millennials’ spending power “eclipse” that of the Baby Boomers, with most focusing on buying property that meets their lifestyle desires and financial situations.

Speaking yesterday, he said: “The expectations we have for Millennials from 2018 onwards is based on our members’ observations, which mirror that of data we are seeing from the US. 

“The next five years will see the most spending power of Baby Boomers eclipsed by Millennials, with the majority focused on buying apartments as their first home — moderate commutes to work will be acceptable but the majority will not find the outer suburbs of metropolitan areas very appealing. In essence, Millennials are driven by lifestyle.”

Continuing, he said that the current norm is now: “I want it, I’ve earned it, I can have it.”

He said the lifestyle changes that used to be a prerequisite for investing in property are “no longer mandatory”.

However, the property Millennials buy will be their homes for, on average, six years before they move into something better.

Internet connectivity is an important factor for young Australians buying homes and this generation is also more likely to consider whether their property is “picture-perfect” by doing research online.

According to First National: “[Millennials] regard internet speeds and choice of telecommunication providers as incredibly important to assessing a potential home.

“Television lifestyle shows also play a role in their real estate requirements with current home styling and design trends high on the must-have list.”

This cohort is also more likely to choose homes close to their work, and homes that are “move-in-ready”, rather than properties which require renovation.

Forty-eight per cent of Millennials prefer to buy new homes and avoid plumbing or electrical issues, compared to 34 per cent of other demographics.

The real estate group said Millennials are making more money than previous generations, with buying budgets predicted to be “well above those of Generation X and Y”.

“It won’t be unheard of for some to make their first purchase in the realms of $500,000 to $750,000.”

Millennials are earning more, but is housing actually more affordable?

First National’s claims that Millennials are getting paid more than previous generations come as another report argues there are no “affordable” housing markets in Australia.

The 14th Annual Demographia International Housing Affordability Survey revealed that in the late 1980s, Australia’s price-to-average household income ratio was below 3.0. This means that it would take three average incomes to buy a property. 

Currently, Sydney’s average property price-to-average household income ratio is 12.9.  

According to the report, this is “the highest ever recorded outside Hong Kong in the Demographia International Housing Affordability Survey”.

It continued: “Sydney is again Australia’s least affordable market, with a median multiple of 12.9, and ranks second worst overall, trailing Hong Kong.

“Sydney’s housing affordability has worsened by the equivalent of 6.6 years in pre-tax median household income since 2001. This is a more than doubling of the median multiple. In contrast, Sydney’s housing affordability [decreased by a quarter as much] between 1981 and 2001.”

After Hong Kong, Sydney was the second most unaffordable city. Melbourne was the fifth most unaffordable major-market city. Adelaide was described as “severely unaffordable”.

The report said: “There are no affordable or moderately affordable markets in Australia.

“Overall, 15 markets in Australia are rated severely unaffordable.”

Priority shift: Millennials set to favour property over lifestyle
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