– By Sahil Virani
Real estate investments are approached differently by various demographic groups such as baby boomers, millennials and Gen Z. A more detailed examination of these unique attitudes and approaches can provide a better understanding of how these groups perceive real estate investments.
Born between 1946 and 1964, baby boomers approach real estate investment with a more conservative approach than younger generations. Often having a more cautious method to investing, baby boomers consider real estate as a safe and stable investment option for them. Home ownership is a big priority for this segment and they may own multiple properties for investment purposes.
One of the most common reasons for this belief in real estate investment is that baby boomers have accumulated enormous wealth over their career and real estate investment is their way of diversifying their portfolio and generating a passive income. With a longer-term investment horizon as compared to the other two classes, baby boomers are more focused on generating income than on building long-term wealth. This is because they are closer to retirement age and prefer investment in stable and established real estate markets that have a history of generating reliable returns over time. Real estate investments act as a steady source of income that can augment their post retirement savings.
One look at the pandemic as an example, and you will see how baby boomers as a segment was financially secure owing to their real estate exposure. While the COVID-19 pandemic had a significant impact on many aspects of the economy and people’s lives, baby boomers with real estate investments were not much impacted. One reason is the stable source of income it provides, even during economic downturns. Many baby boomers who had invested in rental properties or REITs continued to receive rental income even as other sources of income were disrupted by the pandemic. Additionally, real estate investments provide a hedge against inflation, which poses a concern during times of economic uncertainty. Real estate values often rise over the long term and baby boomers who had invested in real estate may have been able to weather the pandemic-induced economic fluctuations without significant impact to their overall net worth. Finally, baby boomers were also able to take advantage of the low interest rates during the pandemic to refinance their existing properties or purchase new ones, thus boosting their investment returns.
Overall, baby boomers tend to approach real estate investment with a conventional and long-term mindset, valuing the stability and predictability that real estate can offer as a way to preserve and grow their wealth.
Born between 1981 and 1996, millennials are a large demographic group that is increasingly interested in real estate investment as a means of building long-term wealth. According to a Knight Frank research report, millennials today constitute around 43% of all house buyers, more than any other demographic group. While the millennials view the real estate segment as a valuable asset that provides long-term appreciation and rental income, this segment however faces a number of financial challenges including stagnant salary, high student loan debt and rising housing costs that poses a problem for them to enter the real estate market as homeowners.
While homeownership remains a goal for many, this generation is also open to alternative real estate investment strategies that allow them to participate in the market in innovative ways. So, in addition to residential real estate exposure, millennials also look at REITs and InvITs investment vehicles that allow them to invest in real estate and infrastructure assets, respectively, and thus participate in the real estate market without actually directly buying a property. Additionally, millennials also explore other technology-driven forms of real-estate investments like online real estate investment platforms and crowdfunding. These platforms allow millennial investors to invest in real estate projects with lower minimum investment amounts, greater transparency and higher levels of accessibility. Overall, millennials see real estate investment as a valuable asset that can provide both rental income and long-term appreciation.
People born after 1996 belong to the Gen Z group and they are the people who are just about entering the workforce or at the beginning of their career. While previously, the youth at the beginning of their career would splurge money on wants more than needs, the Gen Z today have their priorities set. While they may not yet be able to purchase property or make large real estate investments, at the beginning of their career, they do have a roadmap to follow and at least look at small time real estate investment like investing in a studio apartment or a 1 BHK and in locations that may be in the city periphery and opening up. Also, their investment choices are not solely driven by their own economic advancement, but are also infused with a sense of social and environmental responsibility. Gen Z is acutely aware of the urgency of sustainability and climate change, and are therefore eager to invest in real estate options that are green and sustainable.
As they continue to progress in their careers and accumulate wealth, Gen Z is poised to become a significant force in the world of real estate investment. With their keen focus on responsible investing, they are sure to leave a positive and lasting impact on the industry, and indeed, the world.
(Sahil Virani is the Managing Partner of Empire Realty, a part of the Virani Group).