Owning a house is a momentous event and considered a final rite of passage into adulthood and financial independence. Young, market savvy and informed millennials aged between 25 and 35 years can’t wait to have a home to call their own. Unlike their parents, who often waited until retirement to own property, the current generation is wasting no time to enter the property market.
According to a recent survey conducted across metro and non-metro cities, millennials see acquiring a house as their biggest aspiration. While 69% aspires to buy a house, only 57% have a house or are financially equipped to buy one.
Even as a rising number of the millennial generation is foraying into the housing market, the hurdles they are facing are greater than previous generations. Here’s a look at some of the major challenges they face in their journey to buy a home:
1. Struggle to save for down payment
The biggest trial millennials face when buying a home is saving up enough money for a sizeable down payment. Many of them who have just completed their education and started working in entry-level positions don’t have the income to cobble up a big amount.
Any progress towards saving for a down payment is offset by the rising cost of living. Millennials dread being hit by the double whammy of escalating rents and home loan EMIs. Many of them also underestimate how much they will need for a down payment and don’t work towards consolidating their savings.
As a result, several first-time buyers often end up receiving supplemental income from their parents for their down payment.
2. The burden of student debt
The rising cost of higher studies has resulted in many millennials taking on the responsibility of a hefty student loan. As soon as they start earning, the priority is to pay off the student loan which, in many cases, is as sizeable as a home loan.
They have neither the financial bandwidth nor the credit rating to take on an additional financial commitment in the form of a home loan. It’s no surprise then that millennials find buying a home out of their range and are unable to prioritise it.
3. Lack of financial planning
Many millennials don’t have their finances in place when it comes to planning for a property purchase. Home buying is not just a significant financial commitment, it also requires meticulous planning over a period of time. In the building years of their life, young buyers are busy establishing their careers and professional life.
They can’t make the time required to purchase a house that involves many legalities, processes, and deadlines. The process can take several months and millennials may run out of time and patience needed to buy a home.
As they strive to find a foothold in the workplace, millennials are also facing job instability and economic challenges.
Only the ones with stable jobs can take on the financial burden of a home loan.
4. Taking longer to ‘settle’ down
Millennials often marry their home buying decisions with their family ones. Since they are busy climbing the corporate the ladder and settling professionally, family matters such as marriage and having children are pushed back.
Many young people are not ready to take up responsibilities that come with raising a family and are, therefore, deferring their decision to buy a home. There’s no real urgency for them to own a home hence they don’t give it enough thought and importance.
Open to moving cities and even countries for better opportunities, millennials find it more practical to rent a home than buy one and get tied down to a city or locality. They may also have to wait for a few years for their careers to settle down before exploring the idea of investing in a property.
5. Not prioritising the right things
Millennials are known to do hours of online research just to buy a pair of jeans, so they spare no effort when it comes to buying a home. Their research-driven culture is supported by the Internet that is brimming with countless options.
While sites like Pinterest and Houzz may throw up lots of exciting images, there’s a lot more to purchasing a house.
Young buyers spend a lot of time looking up the design and aesthetic aspect and may end up ignoring financial details such as how to apply for a home loan and other legalities.
Can these hurdles be overcome?
While there’s nothing millennials can do about the external challenges they face, the important thing is to be open to solutions. With some thoughtful planning and disciplined saving, most of these hurdles can be overcome to make homeownership a reality.
At a time when home sales are dipping, the buying plans of millennials are important to the economy.
A report brought out by the CREDAI Youth Wing, in association with real estate consultancy CBRE, reveals that millennials identify ‘investment’ as the key driver for buying a property.
With 40% already owning their home, the dream of home ownership for millennials is definitely alive. Even in the face of stagnating salaries and rising house prices, the dream may be deferred but definitely not dead.
