The home ownership dream is not dead but deferred for many millennials around the world according to HSBC’s first Beyond the Bricks study, with slow salary growth and house price inflation the greatest barriers to millennials buying a home.
Released today, the study of more than 9,000 people in nine countries finds that 40% of millennials currently own their own home. Among millennials who don’t own, more than four in five (83%) intend to buy in the next five years.
|COUNTRY||MILLENNIAL HOME OWNERS
INTENDING TO BUY
IN NEXT 5 YEARS (%)
|United Arab Emirates||26||80|
China survey sample includes 85% urban, 14% suburban and 1% rural respondents
However, millennials still face significant challenges when it comes to housing affordability. Sixty-nine percent of those intending to buy have not yet saved enough for a deposit, and 34% are being held back because they cannot afford the type of property they would like. Property prices in eight of the nine countries increased in 2016.
PRICEGROWTH 2016 (%)1
|PROJECTED REAL SALARY
GROWTH 2017 (%)2
|United Arab Emirates||-5.4||0.5|
1International Monetary Fund: Global House Price Index October 2016 (2016: Q2 or latest, annual percent change)
2Korn Ferry Hay Group: 2017 Salary Forecast
With 64% of millennials who don’t own a home saying they need a higher salary to be able to buy, not all millennials are likely to achieve their goal of home ownership.
Seven of the nine countries are projected to experience real salary growth of less than two percent in 2017.
According to Louisa Cheang, HSBC’s Global Head of Retail Banking: “This study challenges the myth that the home ownership dream is dead for millennials around the world. With four in ten already owning their home, the dream of home ownership for millennials is definitely alive and kicking. The greatest challenges are in those countries where there is a perfect storm of stagnating salaries and rising house prices – for millennials in those countries, the dream, while not dead, looks set to be deferred.”
The report also finds that many millennials do not have their house in order when it comes to financial planning for their home purchase. Among non-owners intending to buy a home in the next two years, nearly one in three (31%) have no overall budget in mind and a further 54% have only set an approximate budget.
Therefore it is not surprising that 56% of millennials who bought a home in the last two years ended up overspending their budget.
On the other hand, the millennial generation is willing to consider making big sacrifices to afford their own home. Fifty-five percent of non-owners intending to buy would consider spending less on leisure and going out, 33% would consider buying a smaller than ideal place and 21% would even be prepared to delay having children.
Financial support from parents can make all the difference when saving for a home, and 36% of millennials who bought their own home turned to the ‘Bank of Mum and Dad’ as a source of funding.
HSBC’s research identified four actions that millennials can take to help make their home ownership dream a reality:
1. Plan early and don’t underestimate the deposit
Start planning early to make home ownership a reality sooner. Include saving for the deposit, usually the first payment you will need to make. Find a competitive mortgage to help make borrowing the rest more affordable.
2. Budget beyond the purchase price
Think about the extra things that will make the house you buy the home you want to live in, and make sure to include them in your home purchase budget.
3. Consider what sacrifices you can make
Consider cutting back on your day-to-day spending. Think outside the box about what could help you to buy a home, such as buying with a family member or friend.
4. Get a full view of your finances
Think of your mortgage as part of your long-term financial plan, not as a one-off transaction. Different types of home loan suit different needs and situations. Seek professional financial advice if you need help to make the right choice.
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