Millennials: Your New Generation of Buyers
OTHERWISE KNOWN AS GENERATION Y, MILLENNIALS ARE APPROACHING EVERYTHING DIFFERENTLY. AND WHETHER IT’S ABOUT THEIR VALUES, THEIR SEAMLESS RELIANCE ON TECHNOLOGY OR THE WAY THEY EXPLORE PROPERTY, THEY ARE NOT THEIR PARENTS
They are Generation Y, young adults born between 1980 and 2000, who are changing the way the world functions and how markets operate. They are doing it through their spending habits, techno-savvy approach and a global view that is significantly more questioning than that of the generations who preceded them.
According to a report titled Millennials by Goldman Sachs Global Investment Research, the US has 92-million millennials, the biggest generation in US history. A growing number of these adults aged 18 to 35 years are choosing to live at home with their parents. The percentage of 18 to 31-year-olds married and living in their own household has dropped more than 50% since the 1960s.
The millennials are prolific technology users, generally considered the most connected generation for their embrace of technology and social media across their lives. This includes their approach to purchasing property – millennials now constitute the bulk of the world’s first-time homeowners.
GENERATION Y IS HUGE
The National Association of Realtors Home Buyer and Seller Generational Report 2015 cited Generation Y as the largest group of American homebuyers, far outstripping the Baby Boomers. First National Bank data reflects that 44% of South African buyers are less than 40 years old, putting a significant percentage of buyers into the millennial category.
Acutt Property Group MD Jonathan Acutt unashamedly fits the demographic profile of the millennials with whom he often deals as customers. A typical day involves waking to his cellphone alarm, spending 15 minutes toggling between his Facebook and Twitter accounts, listening to a music-streaming app via Bluetooth connectivity while dressing, checking his digital calendar and cross-referencing his work computer over breakfast.
He’ll listen to audio books or music videos via YouTube while driving to work, having already corresponded with colleagues via WhatsApp on urgent issues, gathered information via various local and international websites and then shared it to his Facebook and Twitter accounts as well as his team via WhatsApp. He’ll end the day reading information via his Business Insider app, stream Netflix on television and view Pinterest posts on making his new home more fashionable.
Acutt says millennials are an interesting generation in that they are the first to grow up with several key technologies already in existence – cellphones, smartphones, personal computers and the internet – and now also have access to apps that simplify their lives. It’s no wonder most millennials’ days revolve around that technology.
“To anyone born before this generation, this may seem shocking. Some might almost pity these individuals. However, when you look deeper, you see a world of superfast information and integration that, once set up, requires little thought to remember and more focus on what they can do with their time,” he says.
SELLING IT DIFFERENTLY
Into that environment is the change that makes for a different selling philosophy for estate agents. Statistics from estate agencies’ websites reflect that 90% of buyers begin their property search online via smartphones or tablets. South African internet penetration is approaching 20%, with the mass market embracing digital tools on their phones and mobile operators cutting data costs and rolling out networks.
Seeff Dolphin Coast sales director Tim Johnson says having searched online for property, millennials use social media platforms to ask questions and gather information about neighbourhoods, property trends and prices long before they encounter agents.
“Within this demographic there exists a culture of ‘don’t call me; I’ll find you’. Once they have done their research, they will seek out a trusted advisor to assist in the buying process,” adds RE/MAX Southern Africa CEO and regional director Adrian Goslett.
Given that mobile broadband subscriptions now outnumber fixed line applications eight to one, and that South Africa experienced a 1,000% hike in mobile users between 2011 and 2012, Goslett says these trends are not surprising. “Catering to these devices with a mobile-tailored website is essential for real estate brands to effectively communicate with the millennial generation,” he says.
However Gosslett also believes responsive agency websites, rather than apps, are a more convenient way for clients to find information related to their property requirements.
“Millennials use technology at the outset, but at some point will look to a trusted advisor to interpret the information acquired,” he says.
RENT TO BUY?
Millennials are generally not focusing on family, wealth creation and settling down. They may swap home practicality for something trendy, tech-smart and stylish with a proximity to where they work. Goslett says an advantage of buying over renting is that it implements forced saving. Bond repayments ensure homeowners have an asset, considering that South Africans generally have a poor savings culture.
Acutt says while property has shown consistent growth over the past century, millennials like to be mobile and not tied down to a specific area or suburb. Hence, he believes millennials can purchase a property for which they qualified, but rent out that investment and offset the rental income earned against the rented property in which they reside. That way they can afford to live in the neighbourhood they desire without having to purchase in that area.
Johnson says that access to finance remains a key issue for first-time homeowners, so typically millennial buyers are dual-income households to slightly boost their buying power. While the younger ones have student loans impacting on their ability to access finance, those acquiring property are entering the market at between R1m and R2,5m.
In line with international trends where children are either leaving home later, returning to their parents homes – the term is boomerang kids – or renting for longer periods before acquiring property, Goslett says the average age of South African first-time buyers is slowly increasing. In April 2015 the figure was 32-years-old, increasing to 34 by December 2015. Absa statistics released in December 2015 reflected the average nominal values for middle-segment properties at R887,000 (small homes of 80m2 to 140m2), R1,274m (medium homes of 141m2 to 220m2) and R1,982m (large homes of 221m2 to 400m2).
Absa Homeloans property analyst Jacques du Toit says year-on-year growth in this sector was markedly lower in 2015. After experiencing nominal price growths of 10% in 2013 and 9,3% in 2014, South African residential values increased about 6% last year.
He forecasts slow economic growth in 2016, hindered by rising inflation, higher interest rates and continued financial pressure on consumers. This will likely translate into subdued housing supply and demand with a nominal house price growth of about 5% and real house deflation over the next 12 months. “The upshot might then be that millennials will hang on the side-lines to assess whether conditions improve before jumping into the market this year,” Johnson concludes.
MORTGAGE BEFORE MARRIAGE?
A more accessible job market, marrying at an older age and exorbitant costs of weddings means that many new homebuyers are putting a mortgage before marriage.
• Approximately one in four married millennials (24% of US adults aged 18-34) purchased their first home with their current spouse before marriage, compared to 14% of those more than 45 years old, according to a Coldwell Banker Real Estate LLC Marriage and Home-buying survey in April 2013.
• Four in five (80%) Americans believe it’s okay for adult children to live with their parents if they are saving to buy their own home, according to a Coldwell Banker Real Estate LLC survey of August 2013 titled Boomerang Kids Study.
• Millennials are more likely to postpone marriage, choosing to live together instead. And one residence costs less than two. According to the American Community Survey, between 1990 and 2008, while millennials were moving into adulthood, cohabiting US couple households increased to 6.2m, nearly doubling 1990 figures.
DEALING WITH MILLENNIAL BUYERS AND SELLERS
• Reply immediately to their e-mail or SMS query about a property.
• E-mail or SMS a link to potential properties.
• Share articles potential buyers may find interesting – they will appreciate it and may share it on their social media profiles.
• Point them to websites for more property-related information.
• Send pre-appointment reminders and post-appointment thanks.
• Say “this is just the way things are in property” but instead provide reasons so millennials can make educated decisions.
• Take a long time to provide feedback.
• Stick to normal marketing avenues.
PROPERTY SEARCH APPS
• 3Dscann South Africa virtual reality videos
The Absa Homeowner Insights report reflects that young, independent singles consider fibre optic networks and properties offering high-speed internet access to their neighbourhoods to be more important than whether the property has a pool or staff accommodation.
Will fibre optic networks soon be seen as an essential utility similar to electricity and water? Fibrehoods have shown accelerated property price growth in developed countries with the US reflecting a 3% increase based on the neighbourhood’s fibre optic networks. While local statistics are scarce, early indications suggest that the roll-out of connected fibrehoods such as Parkhurst has affected the area’s marketability and prices positively.
Words: Nicola Jenvey