Interest rates are still at an all-time-low, and we certainly don’t miss the dark days of 14% affecting your mortgage. You’d make the Sunday roast last all week!
Now, there are plenty of lending options out there and, in a lot of cases, monthly mortgage repayments are less than rent. But despite all of that, millennials (or ‘generation rent’ as they’re sometimes referred to) continue to pay out on someone else’s mortgage.
A quick glance at some recent reports, like the Redfern Report, show why that’s the case. It isn’t because people don’t want to own their own home, far from it. Apparently 80% of us want to own our own place and there’s definitely a ‘mortgage culture’ embedded in the UK psyche. According to recent research, it’s stagnating salaries and costly deposits that appear to be the stumbling block to ‘generation rent’ owning their own home.
Baby boomers could pay twice.
A recent study, ‘Stagnation Generation’ by the Resolution Foundation and Intergenerational Commission, found that millennials (people born between 1981 and 2000) could become the first generation to have lower lifetime earnings than their predecessors. According to the study, those in their twenties today will roughly earn £8,000 less than the previous generation. The fact that incomes haven’t risen and house prices have escalated way beyond their reach means that the jump to saving a deposit is far too big for most people.
Despite that fact, the report mentions plenty of other ways that ‘generation rent’ are getting a helping hand onto the property ladder. As well as Government schemes like Help to Buy, there’s also the bank of mum and dad, which is apparently set to be the biggest mortgage lender this year. According to the report, this year parents will pay out more than £5 billion to their children to help them buy a house and will help to secure 300,000 mortgages in 2016, leading to home purchases worth £77 billion.
My worry is, who’s then going to pay for the children of ‘generation rent’ to get on the property ladder - The bank of Nan and Grandad? Maybe fellow baby boomers Trump and Putin will have seen to it that we needn’t worry about that by then...
And back in the room
If you’re a developer trying to reach and convince this disconsolate market, this information is worth digesting because it seems that it’s not just about trying to communicate and engage with ‘generation rent’ anymore, it’s about communicating and aligning with their parents too.
So what tools and techniques can you use to maximise your reach to this wider audience? First and foremost, if you’re not doing it already, think about optimising for mobile. Most people (not just millennials) will be searching for a home on-the-go and accessing data on mobile devices, so it’s vital your content is responsive, intuitive and easy to navigate.
Speaking to individual groups and personalising content is also a proven way of creating an emotive marketing campaign. By segmenting your data, you can build a far more immersive experience for the end user and make it easier for them to see the direct benefit. Whilst ‘generation rent’ might be interested in how they can entertain friends in their space and what bars and pubs are in the area, their parents will be more concerned by the affordability factor, potential for capital growth and security, so it’s important to tailor your content via CRM and on the website.
The return of the institutional investor
For those GenRenters who are not for turning, the burgeoning Private Rental Sector lies in wait. According to the British Property Federation, over the past six months the number of PRS properties completed, under construction or with planning permission has risen from 21,400 to 57,000 and around 30,000 of those are in London.
In 2011, institutional investment accounted for 1% of the UK property market, as opposed to 13% in the US and 17% in Germany. Next year this is forecast to rise to 60% in Germany, 32% in US and 17% in the UK.
The slashed Government grants for housing associations has seen a marked shift towards funds being raised through capital market bond issues. The main buyers have been pension funds such as L&G and M&G, looking for long term security and a steady drip of inflation proofed returns. I note at this juncture, the recent launch of L&G Homes, providing prefabricated modular timber solutions to ensure more of this drip feed is provided faster and cheaper than laying bricks and mortar. This is particularly canny at a time when traditional building materials and labour are in short supply and construction costs are heading north as Sterling glides softly south.
Currently, about 5million households rent privately and an extra 1.2million are expected to join them in the near future, according to Savills. Institutional investors, which include sovereign wealth funds, pension funds and insurance companies, have invested £15billion in the sector so far and are forecast to commit another £35billion by 2020, according to Knight Frank.
So with the potential for more renters to simply stay within that sector, despite the continued carrot of Help to Buy luring them to buy a home, the importance of convincing ‘GenRenters’ to switch and leveraging their parents entrenched paradigm of owning one’s castle is becoming even more pressing for private developers.
If you want to keep your property marketing moving at the same pace as PRS, contact our team to chat about intelligent property marketing solutions and watch this space for further developments.