Buying a house used to be the ultimate goal for generations of people all around the world.
Investing in something that lasted, something you could pass on to your kids, a cozy nest to hold on to through good and bad days.
The youngest generation though -also called generation Y (Why) or Millennials (a fancy word to name men and women born between 1980 and 2000) - seem to have other ideals of life.
What are the reasons that are pushing people in their 20’s, 30’s and even 40’s to rent a place that they call home sweet home rather than buying it?
1. Economic reasons
Money (still) rules the world. As unfortunate -or cool- you might think this statement is, it is nonetheless true. Financial issues are among the main reasons why people don’t buy homes as much as they used to.
Residual jobs instability
We do live in an era of higher unemployment and lower incomes, in comparison to the previous generations. The gap between wage inflation vs housing inflation today is much wider than it ever has been before.
People also seem to switch from one company to another at a more frequent pace when they don’t decide to completely change the course of their professional career and take a new orientation, from IT engineer to organic brewer or pastry chef!
Either because of a personal choice or a professional hiccup, it might be harder to hold on to the same salary for a long period of time and then buying (which usually ties you up to a mortgage for the next 10 to 20 years) might sound a bit too risky.
Difficulties to get a mortgage
For the exact same reasons mentioned above and because of increasing and stricter bank regulations (supposedly to protect consumers), banks might give you a hard time getting a loan at an interesting rate.
And most people don’t have that kind of cash upfront or at least a solid deposit from savings to pay for an apartment or a house.
Still in college
Many young adults nowadays stay longer in college or university.
They either rent or stay with their parents and they most probably won’t invest into a home without a regular paycheck and most of all, without even knowing where their first job will be.
Less debt, more cash flow
Many youngsters, particularly if they are not married yet with kids, don’t want to tie the knot with their bank! They don’t want to feel trapped with a debt.
Less debt means more cash flow -and freedom.
Opportunity to “upgrade” as desired
Pragmatism does not prevent ambition! Most of young professionals hope or expect an increase in income and want to move into a better property or neighborhood within the next few years.
So why would they buy now when they hope to move out in a couple of years?
Housing has become a pure financial investment
Don’t get us wrong. People still buy houses. But lately a lot of them prefer buying a place as a secure investment and not to live in.
They buy a place, put a tenant in whose rent will pay for the mortgage they might have taken out to buy the place.
That way no matter what their professional situation is, the loan will be taken care of and in 20 years they will have a place to rent, sell, live in or lend to their kids. Smart!
People used to consider that renting a home was like throwing money down the drain.
Might sound logic back then but based on practical matters but also new inspirations, renting has become a chosen trend.
Appetite for the hype (neighborhood)
Many people want to live where the action is in trendy, pretty neighborhoods. This comes at a cost.
Apartments in cool locations of Paris (like Oberkampf or Montorgueil) now cost a fortune and buying one will remain a distant fantasy for many.
So unless you have a really good situation (like really good!) or you are in a couple, it’s becoming difficult to find a nice place with a decent size at a decent prize in any of the big fancy capitals. Either you must go for smaller or you must choose to become a suburban.
Renting in your dream location on the other hand might still be a budget but way more affordable.
Same things if you are looking for a building with all kind of facilities like a pool or a fitness room. Out of reach if you want to buy, not if you are ready to rent.
Freedom to be where you want to be
When you rent, you can give your notice to end the tenancy, pack up and go!
If you want to move to another city or another country just for the fun or because you have found a international assignment, renting will make it easier for you to leave.
If you own your house, you must find a tenant or try to sell it. Not impossible, but less peace of mind.
Money on hand
If you want to have money to go on holiday more often, enjoy restaurants a couple of time a week, travel, you might prefer renting a small one bedroom or a comfy studio.
Some people would rather not put all their money in housing and focus more on their leisure time.
Boiler is broken? There is a leak under the bathroom sink? What a bummer! As an owner, one would have to spend time and money to fix them.
But if you are a tenant, all you have to do is call the landlord.
Late in life
Either it’s about studying, experimenting, working hard or just being fashionable, people usually start a family at a much later age i.e. getting married and having kids.
So the feeling of getting it together and becoming stable and eventually buying a place to live and raise the kids comes later on in life. In the meantime, renting seems a preferable option.
Afraid of commitment?
Aren’t we all to a certain extent? Maybe but the young generation seems to be having real issues when it comes to commit to a job, a place or a partner.
Is it the fact that they are a bit self-obsessed or is it our society that is offering way too many choices and make them insecure about making or missing the right one?
And in a world of increasing global mobility, where information circulate faster than light and inconsistency feeds on social networks frenzy, trust issues are common. Renting then seems like a less stressful situation to handle.
It’s not just about housing. Millennials already rent everything including car, access to music, even tote bags and designer dresses.
Highly-connected nomads, it’s a natural thing to them that they apply to many things.
And if this renting generation feel the need to be rooted to something, they go home to mum’s and dad’s place for the weekend!