Millennials are now a force to be reckoned with in the property market, and despite the economic slowdown due to the pandemic, their interest in real estate investing is growing.
Who are these millennials, also known as the Generation Y segment? They were born between 1981 and 1996. According to a Statista survey, 70 percent of the global workforce last year was comprised equally by Gen X (born between 1965 and 1980 ) and Gen Y. Forecasts however suggest that the Gen Z (born between 1996 and 2015) will make up nearly a quarter of the workforce as they start to enter adulthood.
According to an article written by online newsletter Brink, “one-fourth of the Asia-Pacific workforce is made up of millennials, representing an estimated $1.1 trillion in buying power in 2020, making this demographic one of the most important consumer bases in the region”.
Similar socio-economic mindset
In the Philippines, most millennials are fully employed. Typically, the younger set occupies supervisory to middle level-income jobs, while the older ones are ensconced in the senior manager level category (director or vice president position). Many of them are still single and reside with their parents but for the unmarried 30-something millennial, independent city living has become an aspiration.
Millennials are a diverse group but they all share similar socio-economic mindsets when it comes to homebuying. The elder millennials are well into adulthood. On average, a big chunk (more than 70 percent) of my MBA students at the Ateneo Graduate School of Business are millennials. They are financially prudent and half of this segment have expressed their desire to eventually invest in a home. Many are still single but they are saving money so they can purchase their dream condo that’s conveniently closer to their places of work.
If Gen X has the three C’s (cash, condo and club membership), Gen Y is bent on having the two C’s (cash and condo), especially with pre-developed home prices and terms of payment practically within reach. Admittedly, the surge in demand for residential purchases for more than a decade was disrupted by the pandemic and despite soaring unemployment that peaked in the fourth quarter of 2020, middle and senior level Gen Y executives are still optimistic about their long-term future.
Influencing the purchase decision
A digital-first generation, millennials rely heavily on social media to share content with their peers, promote the things they adore and get closer and personal with their favorite brands. For property developers wanting to influence the purchase decisions of a millennial audience, social media provides you with limitless opportunities to do just that.
Millennials coming from a middle-income family tend to get a helping hand from parents eager to make sure that their children are secured with their first ever major investment—the purchase of real estate. This practice of parents providing financial support and credit guarantees so their adult child can finally purchase a condo unit represents more than 60 percent of all homebuying purchases.
A typical millennial would usually shell out anywhere from P3 million to P7 million and their preferred locations in Metro Manila would be Makati, Bonifacio Global City, Taguig and Ortigas. For Cebu, the hands-down favorites are the Ayala developments at the IT Park. In Iloilo, the preferred destination is the Megaworld township development, Iloilo Business Park.
‘Superior investors’
But developers must take note that there is also a category of high-net-worth (HNW) millennials coming from second generation business families or successful startup entrepreneurs and investors who have made a fortune and can now afford to invest and venture in high ticket properties. We refer to them as super investors and they are savvy in many respects with excess money to spare for as long as these real estate purchases ranging from P10 million to P80 million would provide attractive yields.
This segment is something developers should cast an eye on. Pre-pandemic sales of condominiums were primarily driven by overseas millennials coming from China and these pent up demand fueled price surges in the Bay Area traversing the cities of Parañaque, Pasay and all the way to Manila.
With the slowdown of overseas investors, developers must now creatively establish a solid plan to lure this local yet powerful segment. The real challenge for developers is all about creating a powerful differentiation on their products. To shift the share of mind to share of heart to share of wallet, products must be compellingly and emotionally different.
The author is an executive director of Wong + Bernstein Group