Generation Rent - Home ownership not as important as it used to be
According to market data, between 2010 and 2016, the average duration of a tenant in a rental was two years, and one in ten lived in their rental property for more than five years. But while it’s not overly uncommon to rent for 2 – 3 years, it’s becoming increasingly popular for people to lock in for fixed term periods and sign for another fixed term following the end of the lease.
Traditionally those looking for long-term rental properties have been either someone seeking executive style properties with no maintenance, or families and couples who want the stability in their lives and a place to call ‘home’ while saving towards a home loan deposit.
Almost every kiwi has the dream of owning their own home one day. But with house prices increasing, the cost of rent going up, and the minimum deposit for a home loan remaining around 20% - the dream is moving further into the distance and people are having to rent longer.
So what is this all leading to?
A generation of renters – not buyers
The question that perhaps needs to be asked is: is the dream of home ownership as important to the Millennial generation as it was Baby Boomers, and is to Gen X?
According to Goldman Sachs data; Millennials are putting off commitments like home ownership, ‘older millennials’ are choosing to rent over buying, and 30% of them say home ownership is important but not a big priority.
The data also shows that Millennials prefer to operate in a ‘sharing economy’ where access, not ownership is preferred. The concept of owning a car is the same – car sharing, not car ownership, will be the new norm.
A European model worth exploring?
In Germany, there is an oddity that is completely different from our renting model. The tenant tends to bring their own fit outs including kitchens, curtains, and lights, and the landlord just leases out the shell, but the leases are commonly 10+ years long. I don’t think this is something we will see in New Zealand for a while, but it’s an interesting concept to let the tenant decorate and theoretically make it ‘home’.
If this were to become a model here Millennials will be the one to instigate it. There may soon be a growing demand for longer term rentals and the considerations that go along with it, such as greater flexibility for the tenants to decorate and fit-out as they like.
One thing I know for sure – Millennials do things differently and the rental property market needs to be adaptable and change with it.