MILLENNIALS IN THE U.S. & IN CHINA: THE YIN & THE YANG

If you think that, everything being equal, young people share the same dreams and explore the same real estate opportunities regardless where they live on the planet Earth, think again. Maybe the only thing they have in common is belonging to the same age group. It is a big world out-there and population is distributed in between too many age groups, so I will limit the comparison to only millennials (18 to 35-year-old) and only from the 2 most powerful countries: the US and China. Hold on to your seats. The differences between millennials here and there, in terms of home-ownership, are very significant today and promise to be even more so in the years to come. Take a look at the following facts and figures and draw your own conclusions as far as where capitalism and the accumulation of wealth are more likely to grow going forward, if the trends are confirmed. Let’s start analyzing the Chinese millennials. They are many. How many? Something like 335 million if my calculations are correct. That’s roughly 25% of the entire population. More interesting, from my point of view, is the fact that the number of millennials in China now exceeds the total US population…. Now, guess how many Chinese millennials already own a home. 70% of them, or 235 million. That’s how many. And the number is growing. When 235 million people buy a home, the real estate business cannot be that bad. The impact of the millennials’ buying spree is considerable for the economy. Granted, a good number of the properties are actually purchased by the parents under the name of the child. When you have to make do with 1 child, as it was the law of the land until just recently, nothing is too much for a lucky son or daughter. This, however, does not change the fact that a quarter of the millennials are homeowners. OK, now let’s move 6000 miles to the East and look at the corresponding picture in the US. Huge difference. Here, the millennials represent roughly 24% of the population, or about 78 million. They are the largest generation in the workforce, ahead of boomers (76%). But, unlike the boomers who love real estate (75% of them own a home), the millennials are at the tail-end of the train. I bet you are still waiting for me to tell you what the home ownership is for millennials in the US, right? Well, it is “only” 13%. Ouch. (Remember it is 70% in China). That explains why the overall home ownership rate in the US is now down to 65.1% and shrinking. Money, or the lack of, has of course a lot to do with this. After a painful recession and long but anemic recovery, a good half of the millennials find themselves in a precarious financial situation. Only about a third of them have a full time job, while about 20% work part-time. The money saved, if any, often goes first to paying off debts like student loans. Instead of living in a home they own, 32% of our millennials live in their parents’ homes. The majority of the others are renting, often with the help of other millennials. Purchasing a home is still a goal but one which is on the back burner for most. Not to mention that a good fraction of the millennials who could easily purchase a house or condo have different priorities: fun & interesting stuff like traveling the world and enjoying life with friends. Why not? Yes, the priorities are quite different when you are young, depending on whether you live in the US or China. I am sure that by now, you are thinking about what it all means today and what it will mean down the road, 10, 20, 30 years from now. Money invested in real estate creates more wealth opportunities for those who buy and the community as a whole. Something to keep in mind. As if it was not enough of a wake-up call, there is more to report on the appetite that the Chinese millennials seemingly have for real estate. Not unlike their parents who, for years, have massively invested in real estate overseas (and mostly in the US), many are the Chinese millennials who are now investing abroad. In a recent WSJ article, Dominique Fong explains that some millennials, in their “desire to hedge against yuan depreciation and find affordable cities with cleaner air”, are buying foreign properties that… they have not even visited! Online home shopping. I am sure the sellers are not complaining. How does it work? Elementary: you pull your smart phone out of your pocket, use the Uoolu app that connects you to overseas listings, locate country and property of choice and pull the trigger, assuming you have a local bank account and can get a mortgage. No sweat, Uoolu will help you take care of both. Uoolu, based in Beijing, reports that 80% of their users are between 20 and 39 and that 20,000 customers have already bought or are now in the process of purchasing a foreign property. Not bad for a young real estate platform that hopes to break the bank (and get loads of VC money) with the fast growing millennials’ population in China. The real estate scene in both the US and China keeps on changing. The world will never be the same. Keep your mind and your eyes open.