Millennials Choosing to Rent, Not Own – Why?
Millennials are starting to climb the career ladder. With that comes an increase in earnings.
Their sights might be set on property, but many aren’t taking the leap to purchasing property.
Rent or own? When it comes to choosing a living space, it’s a question young people ask themselves as they begin establishing their personal and professional lives. While renting used to be considered the first step towards settling into a family home, more and more millennials (22 – 37 years old) are seeing it as a less of a stepping stone and more of a lifestyle choice.
At PropertyFox, we look at why millennials are more prone to renting property than owning it.
Why Millennials are Choosing to Rent
Sure, buying a home is great: You build equity, the interest and property tax portion of your mortgage is a tax deduction, and it’s a major life milestone accomplished.
But for many millennials, renting is more their style, and here’s why:
- It’s cost-effective. With student debt putting a big dent in millennials’ bank accounts, it’s no surprise that they prefer monthly rent payments to the acquisition of additional debt in the form of a mortgage.
- The cost of buying and owning a home has steadily risen over the years, causing a massive boom in the rental market across the globe – and not only amongst millennials. That said, when comparing the cost of renting to that of paying off a bond and other costs associated with owning a home – such as rates, insurance, utilities etc. – renting is by far the cheaper (and therefore more likely) option.
- Plus, closing costs, home insurance payments and property taxes add up fast – renting is often the best short-term option.
- You can come and go as you please. Whether it means traveling overseas for a couple of weeks or moving to a more desirable neighbourhood across town, millennials love the idea of being able to pack up and go when their lease is up, rather than being tied down by a mortgage.
- Renting offers a greater measure of flexibility and choice and is, therefore, a lot more attractive as an option in the eyes of millennials.
- Additionally, young people tend to leave their jobs whenever a new opportunity arises. With this said, temporary leases make it possible to accept a dream job that might be in a different city – or even on a different continent.
- Let the landlord handle things. Yard work, repairs, upkeep – a lot of time and money goes into maintaining a home. That’s not to mention utility expenses. As a tenant, these chores and costs are usually covered by property management or a landlord.
- It’s far more attractive to Generation Y to absolve themselves of these responsibilities.
- This allows them the freedom to do whatever they please with their free time and save on property maintenance costs.
- As a homeowner, it’s all on you. For hard-working millennials who covet their free time and having the funds left over to enjoy it, passing labour and expenses to a landlord can be a huge upside.
- You can live where you want. Renting makes trendier, more desirable areas of town accessible to millennials who aren’t making as much money as they will be in a few years.
- It’s a great way to preview the cost, commute and overall vibe of a neighbourhood before making (or being able to afford) a long-term financial commitment.
- And if the hip urban art district everyone’s raving about isn’t your scene, it’s easy to move out.
Renting offers a greater measure of flexibility and choice and is, therefore, a lot more attractive as an option in the eyes of millennials.
Buying is Still an Option
Despite many millennials choosing to rent rather than buy, there seem to be some positivity in the market for them. According to statistics provided by Lightstone, South African millennials have purchased homes in great numbers over the recent years with almost 330 000 millennials buying homes within South Africa between 2015 and 2017. Of these, 70% were first-time buyers.
Here are a few tips for millennials that could help them if they are looking to invest in property one day:
- Start saving today for your future home. This is the most important advice. Even if you start by just saving R100 a week. You could also opt for accounts with a good interest rate and build up to something long-term like unit trusts to help strengthen your savings.
- Know when to buy. The best time to buy a house is during a buyers’ market. It is also wise to buy as soon as you can afford to.
- Budget for more than just your instalment. As a first-time home buyer, you need to consider the other costs that come with buying a property. This includes transfer duties, bond origination fees, homeowners’ insurance, life insurance, household contents insurance, property repairs and maintenance.
Simply put, times have changed, and millennials or Generation Y are opting for a lifestyle that offers them freedom, convenience and flexibility. Buying still seems to be an option though, so property possibilities for millennials seem endless.