It’s the end of homeownership, and I feel fine
For many Millennials, the prospect of not owning a home of their own is one that doesn’t faze them. In fact, new research shows many are happy to rent forever. This is good news for property investors, so just how do you tap into the needs of Generation Rent?
The Great Australian Dream of homeownership is not necessarily dead, but it’s an aspiration that many younger people are happy to forgo. Renting for life is commonplace in many countries, particularly in European, American and Asian cities, and it’s a prospect that no longer fills Aussie Millennials with a sense of dread.
The 2019 Renters’ Report, a partnership between realestate.com.au and Pedestrian TV, explored the attitudes, behaviours and concerns that young Aussie renters (aged 18 to 39) experience around the country. Based on the results of the survey, it was found the average renter is predominantly female, aged 25-29, with an annual income of $50,000. They mainly live in Sydney (32.8 per cent) and Melbourne (31.1 per cent).
A key finding revealed that while the majority hoped to eventually own their own home, 20 per cent of Generation Y (those born between 1981 and 1996) would happily rent forever.
While Generation Rent had a number of concerns – including competition being the toughest part of the rental process according to 41 per cent, given more than 30 per cent had been knocked back from more than three properties before finding a rental – paying high rents wasn’t one of them.
It’s worth it
Despite more than 40 per cent of Millennials being in rental stress (defined by the ABS as a situation where the housing costs are more than 30 per cent of the gross household income), the survey found the majority who were in rental stress either didn’t know or didn’t care. Around 72 per cent said they felt the price they paid was fair and they would never question the figure. And just one-third (33.1 per cent) felt that price was the determining factor about where they chose to rent.
Location, location, location
In fact, the main consideration is location. Young renters were more than happy to pay high prices for rentals in desirable locations. More than half (51.7 per cent) of Millennials believed location was the most important consideration when choosing a rental property. The majority were prepared to trade both the quality and style of rental for a desirable postcode. They were also prepared to sacrifice personal space to keep costs down and live in their preferred location and property – with 30.9 per cent living with three to four housemates.
The survey results are great news for landlords who will see demand for rentals continue well into the future. This goes for those with city and fringe apartments/units popular with young singles and also for those with homes in the suburbs as the older Millennial cohorts are now in their late 20s-late 30s and moving into the next phase of life – getting married (research from Goldman Sachs indicates the average marrying age for Millennials is 30-years-old) and having families. With many Millennials also tipped to become ‘retiree renters’, the need for a diverse mix of rentals will also continue as the cohort ages. A survey by loan comparison site Lendi showed 56 per cent of18 to 34-year-olds did not believe they would ever own a property outright and a further survey by finder.com.au showed 47 per cent of renters would consider renting for life if home prices continued to increase.
What Millennials want
Generation Y comprise some 40 per cent of the total renting population. Millennials have grown up in a time of rapid change, giving them a set of priorities, expectations and behaviours quite different to previous generations. And this is reflected in what they find desirable in rental accommodation. Provide them with the things they expect in their accommodation and you’ll not only have happy tenants but increase your chances of receiving sound returns on your investment.
Location is the biggest thing for Millennial tenants – close to work, to family, to dining and entertainment, to public transport, to green spaces, to shopping and, for those with children, to parks, schools, medical facilities etc. So if your rental boasts these features, make sure you highlight it in your marketing. Even if your property isn’t as ideal in terms of location and amenities, there are things you can do to make your existing rental more appealing to Gen Y tenants:
Having grown up in the age of the internet and social media, Millennials rely heavily on gadgets, technology and the latest appliances to make their lives easier and stay connected. For many, ‘essentials’ include a high speed internet connection and Wi-Fi, cable TV, the latest appliances and energy-saving devices. All that tech needs power, so make sure there are plenty of outlets (preferably with USB plug-ins) in all rooms.
Tech tip: Given Millennials are always online (often mobile) – they find all the info they need online whether it’s through social media, websites or online directories – you should make sure you target online channels in your marketing. It’s also a good idea to have everything logistics-related (e.g. paying rent, requesting repairs) online.
According to the World Economic Forum, 63 per cent of young Aussies identify climate change as the most serious issue facing Australia. So decking out the rental with eco-friendly features, like water-saving shower heads, energy-efficient appliances, insulation, a bike locker etc., is likely to bode well with prospective tenants.
- Social spaces
Connecting with friends is important, so homes with social spaces (living room, alfresco area) are popular (make sure there are entertaining spaces at the property). Properties close to restaurants, bars and coffee shops are also sought-after (so highlight in your marketing).
For many, renting will be the first time they have lived away from their parent’s home, so they expect to feel as safe and secure in their rental as they did back home. Rentals with good security can help alleviate safety concerns, so ensure measures like excellent locks, security lighting, alarm systems etc. are in place.
Smart tip: ‘Smart’ security features – smart locks, keyless entry, smart alarm systems, video doorbells, smart lights and motion sensors, smart CCTV, smart smoke detectors, internet-connected floodlight systems that communicate with smart phones etc. – combine the need for security and a connected lifestyle. If you install smart devices and appliances, most of which rely on wireless service, have a book of instructions at the premises indicating how tenants can program/connect them with their chosen internet and Wi-Fi service.
More and more Millennials own dogs and cats, so living in a pet-friendly rental is a must. Go pets-allowed and make sure the property is suitable for furry family members.
Although pet damage is rare, landlords have the security of knowing that their RentCover policy provides up to $65,000 in pet damage cover.
- Longer leases
With many set to rent long-term or even for life, the security of having longer leases may appeal. While some may enjoy the ‘freedom’ that comes with shorter leases, others will appreciate the stability and connection to community that is offered with a longer tenure.
Protecting what’s important
Millennials might favour ‘experiences’ over possessions, but many will still have accumulated a significant number of personal effects – often with high values attached (smart phones, laptops, gaming consoles, sound systems, cameras designer clothing and accessories, watches and jewellery etc.). Making renter’s insurance a smart choice. TenantCover provides protection for contents against theft, or damage by fire, explosion, storm and flood to a total of $25,000. In addition, legal liability for incidents in which someone injures themselves on the property or suffers another loss (where the tenant is found liable) is covered up to $10M. Renters with more extensive contents (i.e. in excess of $25K) or who need cover for high-value items or specialty cover, can contact EBM about Contents options.