A common characteristic shared among numerous countries is their significant millennial population in proportion to all other generations. A millenial is most commonly defined as someone born between 1981 and 1997 and therefore someone who is between 22-38 years old today.
Considering the age range of millennials, it is a generation that is just graduating from university, starting or seeing careers take off, getting married, purchasing a first home and having children.
Contrary to those born between 1965 and 1980, generation X, millennials have attended university and graduate school in higher proportions, saddling them with more debt and expenses while also reducing the number of working years. This has resulted in millennials often delaying marriage, children and purchasing their first home.
Deloitte’s 2019 The Global Millennial Survey, which polled millennials and generation Z (born after 1996) repondents from 42 countries across six continents, found that 49 per cent of millenials and 52 per cent of those belonging to generation Z have purchased their own home. This is below the average rate of overall homeownership for all Organisation for Economic Cooperation and Development (OECD) countries except for Switzerland.
In a study also done this year, The Berkeley Economic Review found that only 37 per cent of millennials in the US own homes. In comparison, 45 per cent of baby boomers, those born between 1946 and 1964, bought their first home between the ages of 25 to 34 according to the study.
Today, 80 per cent of people in that cohort own their homes, creating a bottleneck for younger generations as they are also retiring later and living longer. Overall the rate of home ownership in the US is at about 65 per cent according to a 2014 US Census.
Despite having a different set of priorities, such as generally prioritising experiences over material goods, millennials are also interested in purchasing property. But they just face more difficulties in doing so than generations before.
Homeownership also does not offer the same benefits as it did in the past, since the housing bust in 2008 not only wiped out a great deal of middle class wealth, but restructured the system that allowed so many to become owners in the first place. Thus, the millennial generation has not seen the same appreciation in property due to higher costs.
In the UAE, a 2017 HSBC survey on millennials and homeownership found that of the 1,000 respondents, including both nationals and expatriates, 28 per cent owned homes in the country, the lowest proportion of the nine countries surveyed. Although this is representative of the homeownership rate across all age groups in the country, it is at the lower end of the scale for developed countries.
However, the same survey found that 80 per cent of respondents intend to purchase a home in the next five years.
The gap in the UAE in homeownership rates could be attributed to the following three reasons:
The first is finances, as the cost of the average property currently outweighs the average salary. This can cause a chasm between the cost of renting somewhere to live while also saving enough to meet the minimum down payment requirements. In the HSBC survey, 45 per cent said they lacked funds for a down payment while 64 per cent wanted a higher salary before purchasing a home.
The second reason is that the property offering may not align with people’s wants. Millennials prefer open floor plans, smart living features that incorporate technology and also energy efficiency as well as being well-connected to gyms, entertainment, nature and also a place to work from.
The third point relates to the average amount of time expatriates live in the country.
A 2018 survey by Data Finder, an analytics platform under Property Finder, revealed that the two main barriers to entry for homeownership were saving for a down payment and the current residency policies, which left people uncertain of how long they will live in the country.
Increasing the rate of homeownership in the UAE requires both the public and private sector’s attention. Continuing to relax visa policies, customising properties to accommodate what is important to buyers and offering more options for financing are all steps in the right direction.
Carla Maria Issa is a senior research analyst at Property Finder