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Millennials Opt for Smaller Homes

6 August 2017

When renting or buying property, millennials prefer one and two-bedroom houses, located in areas close to their professional and social lives

Millennials, considered the generation that includes people born between 1980 and 2000, currently aged between 17 and 37 years, are introducing new trends into the real estate market.

They are less attached to properties and are always seeking greater mobility, preferring renting to buying. The homes they choose are rarely larger than two-bedrooms and they like to live in historic neighbourhoods, downtown or near the focus of their work and social life. Most spend up to €600 per month on rent and when they buy a property they don’t spend more than €200,000.

This is the portrait that three real estate brokerages have drawn of this demographic, which already accounts for 20% to 30% of their clients. Considered to be the generation with the highest levels of education and training ever, millennials were born and grew up in a digital age and in a globalized world. They are creative, enterprising and citizens of the world, easily moving anywhere in the world for work, whenever there is an opportunity. They are also more rational when making buying decisions.

MILLENNIALS PREFER TO RENT

Size really doesn’t matter when members of this generation go looking for the house of their dreams, according to Ricardo Sousa, CEO of Century 21 Portugal real estate brokerage. “They are looking for one and two-bedrooms houses, one-bedroom when they are renting and two-bedroom after they discover that it’s hard to find the right home when renting, and start considering buying as a longer-term decision.”

The leading brokerage recently studied the preferences of this part of the population. It concluded that 65% of these young people prefer to rent and only 34.4% opt for buying property. About 78% of millennials opt for rental contracts costing up to €600 and only 19.5% pay rents between €600 and €1000.

As for purchases of homes – and questioned regarding the average value of real estate transactions completed by millennials, Century 21 Portugal branches report that 50% of transactions are below the €100,000 and 46.9% are for homes between €100,000 and €200,000.

These trends have also been noticed by other real estate brokerages operating in Portugal. João Pedro Pereira, executive director of Era Portugal explains that according to real estate agents, “more than 50% of this public opt for rental contracts for economic reasons, but they are always looking for an opportunity to buy. They see the first option as something provisional, but that could last for years. ”

Good deals are seen as ‘nice, inexpensive houses that are ready to live in, requiring at most small renovations.’ Both when buying and renting, anything from studios to two-bedroom houses are preferred.

APARTMENTS ARE FAVOURED

There are several factors that, according to João Pedro Pereira, lead these young people to contemplate a decision on housing. “They start looking for a house at the end of their studies, when they get their first job or start a serious relationship and decide to leave their parents’ home,” he says. In Lisbon and Porto, they tend to look for apartments and in the rest of the country the choice also extends to houses.

In general, of Era Portugal’s clients, “51% are looking for flats, 42% for houses and 7% for other alternatives, usually for land to build on, a number which is lower than the national average of 14 to 15% looking to build their own homes,” says João Pedro Pereira. Purchases on average are between €83,000 and €144,000.

In the perception of Miguel Menezes, responsible for training at Remax Portugal, “this generation is much less attached to their homes than their parents. They want one and two-bedroom dwellings since they are smaller and more liveable, at a time when a family consists of just one or two people. Renting frees them from having the same 35-mortgage as their parents did.”

This is the case in theory, but in practice large urban centres like Lisbon and Porto have constrained and thus expensive rental markets, and people on the market will end up having to look at the possibility of purchasing. Of people in their late 20s, “most, if not all, rent. If there is no alternative they’ll have to buy. Older millennials, having more stable professional and familial circumstances, often focus more on acquisitions,” emphasizes Miguel Menezes.

Ricardo Sousa pointed to a new trend for millennials, co-living, where several people share a house. “Cities are often seeing larger houses and flats coming on to the market, and millennials have already had the experience of co-living at university. Two or three friends, obviously single, get together, rent and share a house.” In his opinion, real estate developers need to become aware of the new trends and try new housing concepts that are more in line with market needs. “We’ve been very focused on the traditional families and the medium-high and luxury markets in the cities and there is an increasing need for lower cost solutions for these young people,” he says.

THE CENTRE IS KING

According to data from Century 21 Portugal, more than 61% of millennials prefer to live in urban centres, almost 40% say they want to live close to their workplace and 31.3% of young people seek residential areas. The most valued aspects in the search for real estate are accessibility and public transport, accounting for more than 70% of first preferences, proximity to supermarkets and shopping centres with 35.9%, leisure and sport infrastructure were indicated by 32%, and proximity to schools was chosen by about 30%.

“They like to be near entertainment and they don’t feel the need to buy cars, they get on a plane and go to another city, they marry and have children later, and they buy houses later, creating a need in the market that just wasn’t as important in the past,” emphasizes Ricardo Sousa.

João Pedro Pereira adds that “they want areas that are central to their lives, that is, they don’t want to live far from their friends, where they work or socialize. They also have a greater concern for balancing professional and personal life.”

Since they really appreciate life out of the home, on the street, they look for, in Miguel Menezes’ analysis, “historical neighbourhoods. The problem is prices in these areas of increased so much that the millennials have been priced out, and they end up finding a place wherever they can,” he concludes.

Original Story: Público – MARIBELA FREITAS

Photo Credit: Tiago Miranda

Translation: Richard Turner