Millennials, those born between 1982 and 2000, are the largest demographic in society today, well outnumbering Baby Boomers. This demographic accounts for 10 million Canadians, approximately a quarter of our population. And, most live in the Toronto and Vancouver areas due to strong job growth.
As a result of many economic factors, including a front-row seat to the 2008 recession and high student debt, many millennials are choosing to rent as opposed to buying. Instead of taking on larger debt loads, millennials are choosing to put off home-buying and continue renting, particularly condos.
“With Millennials facing an unemployment rate of more than 8% and $1 trillion in student loan debt, they’re increasingly renting instead of buying homes.” – Forbes, October 17, 2014
This has important implications for condo investors.
Just listen to what this January 2016 Toronto Star article has to say about millennial renters: “One thing is clear so far: Millennials have had a huge impact on the GTA rental sector because of their willingness to pay a hefty price — on average about $1,800 a month — to rent sky-high new glass-and-granite condos an easy walk from work.”
According to Urbanation, the average monthly rent in Toronto is actually closer to $1,900.
This has not only made condo’s the most attractive investment opportunity, but it has kept vacancy rates at record lows. By low, we mean 1.6% low.
Indeed, millennials are placing much more emphasis on lifestyle rather than owning things. Although home ownership is important for millennials, according to the CBC 42% of them currently rent, and 21% live with their parents.
A recent Globe Investor article gives an interesting historical perspective on why millennials are renting rather than buying: “In 1974, a typical 25- to 34-year-old had to work for five years to put a 20-per-cent down payment on an average home in Canada. Now it’s 12 years, on average. In the GTA, it’s 15 years.”
So, how do investors make their property appealing to the millennial demographic? A few things to consider.
Technology is mandatory, such as energy-efficient features, high-tech security, and high-speed internet access. There also exists a love of amenities such as pools, gyms, terraces, movie rooms, and shared spaces.
The millennials group also enjoy a low-maintenance property. With busy work and social schedules, the less a millennial renter has to do, the more appealing the property.
Although a US-based study, the following chart highlights what the millennials favour over other renters:
Finally, location is extremely important. According to a 2014 study, millennials want to be close to work, nightlife, coffee shops, and transportation hubs, all at once. This might seem like a tall order, but there are some amazing developments such as the Toronto waterfront revitalization project, but we will get into this next week.
Stay tuned, and happy renting!
Ryan Coyle, CoFounder CONNECT Asset Management