As summarised by La Costa Properties Monaco, a 2015 study into young investors in luxury real estate markets, which was published by Coldwell Banker Previews and Ipsos MediaCT, has revealed some important data that shines an interesting light on the financial habits of wealthy Millennials. A survey was conducted and data was collected from 500 High Net Worth Individuals (HNWIs), each of which has a minimum capital of $5 million. It is a useful tool for predicting the trends that may dictate future real estate markets and the investment tendencies of high net worth individuals over the age of 21.
The study is named Wealth, Real Estate And The High Net Worth Investor and it encompasses the real estate preferences of the richest 1.5% of the population, or 1.8 million households. The survey was broad in scope, giving an insightful overview of the opinions and habits of a broad range of participants, from Boomers (50 and older) to Millennials (21-35). The study uncovered some differences between the generations and clarified how these differences affect the traditional real estate market.
Overall the participants’ outlook on investing in real estate was positive. The findings revealed that 54% of HNWI said they planned to make a real estate investment in 2015-2016, which is up from 48% in 2014. An overwhelming majority (94%) predicted their property would grow around 16% in value over the next five years, although that is not a motivating factor in investing. In fact, those considering buying a property were twice as likely to be looking for a residence for personal use, rather than for pure investment/rental purposes.
Despite making up only 26% of those participating in the survey, younger affluent generations provided some of the most fascinating data. It’s clear that HNWIs under the age of 35 are taking an active interest in real estate. The survey found that 69% of this younger generation plan to purchase a new property in the coming year, which contradicts the myth that Millennials are reluctant to enter the housing market.
On the other hand, only 50% of GenXers (ages 35-49) and 17% of Baby Boomers expect to purchase a new property in 2016. The average household income of the Millennials in the survey ($683K) is slightly behind the GenXers ($703K) but more than Boomers ($583K). The fact that Millennials’ average net worth of $9.7M outweighs both the GenXers ($9.2M) and the Boomers ($8.1M) means their perspective offers extremely valuable insight as to how the future of luxury residential purchases is likely to play out. When you look at these figures, it makes sense that Millennials are purchasing homes at substantially higher prices than baby boomers. While boomers paid an average of $1.55 million on their last home purchase, Millennials spent almost $5 million, just $300,000 behind GenXers.
Additionally, Millennials are also leading the trend towards a “live anywhere” lifestyle. Technology has completely changed the picture and younger generations are well aware that they are no longer limited to static locations, and this trend is expected to increase. The most important consideration for younger real estate buyers is a home that’s ready to move in to, followed by modern appliances and technology, as well as the latest in LEED or GREEN certified features. Other features that Millennials desire in a property include open-plan living space, a gym, a home cinema and a safe room.
The study has proven what many in real estate suspected all along: we are experiencing more youth-oriented real estate purchase trends. Millennials now number 92 million – all born between 1980 and 2000, an age where they are reaching their prime working and spending years, so their effect on the economy and real estate cannot be ignored.