What hasn’t been said about millennials?
Recently, we posted about Runda Paradise Maisonettes that costs 25 times my annual salary. This is honestly a better deal than most other places in the surrounding area. The moral of the story is that I’m convinced I’ll never be able to afford a home, at least not anywhere I’d like to live.
Nonetheless, majority of Kenyan millennials( born between 1981 and 1996) consider being able to own a home a “top priority”. Millennials may be killing the housing market but it’s not because they don’t want homes of their own.
Even if millennials are putting off having kids and weddings to buy a home, a host of factors are getting in their way
1. Millennials can’t afford homes
Buying a home is not easy for millennials as the affordability gap continues to widen. With the constant instability of Kenya’s economy, housing keeps going up and up. A 50,000 earning young adult cannot be expected to buy a 20, 000,000 house. However, the older generation did it. Hence, the young adults should device better ways of saving.
Solution: They are advised to seek counsel from a real estate agency such as Kenya Homes
2.High Rent Prices
Millennials spend a lot of money on rent payments limiting them from saving. Nearly half of young adults spend more than 30% of their income on rent. They can be described as being “rent-burdened.” These households have higher eviction rates and are financially unpredictable.
It’s not uncommon for young people to be rent-burdened in places like Westlands or Parklands, where rent price outpace wages. It means they have less money left over that can be used for a down payment. They keep saying they’re waiting to buy until they have enough money saved up.
Solution: There are a lot of houses that have an affordable price range. Millennials should look for those and save for a home. Avoid living on the edge.
3.Student loan debt
Student debts are a burden on millennials trying to enter the housing market. They also have to contend with stingy wages and raises, putting added strain on paying off those loans.
Solution: Just pay it. Accumulating more debts will lead to disaster.
4. Millenials are Not Married/Or Partnered yet
In this generation, fewer people aged 25 to 34 live with either a spouse or partner. The changing dynamic has millennials are staying at home longer and delaying the purchase of their first home.
Additionally, people are getting married later, with the average marriage age at 27.4 for women and 29.5 for men.Life events such as getting married or having children are typical triggers to buying a home. The longer this age group lives with parents or independently, the more homeownership is delayed
5.Tighter Lending
Banks are tightening credit underwriting to reduce risk. But as house prices rise, it is taking millennials longer to accumulate enough cash to put down on a home.
While mortgage affordability programs may offer loans with less down payments. Lenders will often charge higher interest rates on these loans to offset the greater default risk. Therefore, millennials are adviced to seek out these mortagage programs.
6. Millennials are Lured by the Fast Life
Millennials always flock to Nairobi. Due to proximity to the city, most young adults prefer living in places like Roysambu or Kahawa.
Whether it’s a social class or the lure of greater work opportunities, millennials are moving towards regions with a higher proportion of renters compared to homeowners. It pushes up rental prices in the urban centres where they prefer to live. So far, millennials seem unwilling to commute or own a home.
Much has been made of millennials and their spending habits in Nairobi: cars, new clothes, the latest iPhone, KFC or clubs. With the increase in malls and clubs, young people want to spend their money on shopping sprees or nightlife scene.
Solution: Instead of throwing money away at short-lived pleasures, save for a long term pleasure.
The Bottom Line
Housing prices continue to rise in the Kenya and while millennials are delaying home ownership, evidence suggests ownership is not out of reach. However, social changes in how young Kenyan adults are living have pushed home ownership to record low levels and have seen the average age of millennials staying at home rise.
Millennials need to be encouraged to move out and buy homes. They cannot postpone it anymore.
Related: Buying First Home