Letter to editor
MEMBERS of Malaysia’s Generation Z are poised at the transition between renting and buying their own homes, according to data released today by property giant IQI, a member of global proptech company, Juwai IQI.
Members of Generation Z who were born in the years 1995 through 2005 are increasingly facing the challenge of buying their first home.
Juwai IQI Co-Founder and Group CEO Kashif Ansari said, “Because homeownership tends to contribute significantly towards household wealth, Generation Z need to secure their financial future by following their older peers in making the transition towards homeownership in the years to come.”
Generation Z has come of age
According to Ansari, from two years ago, in the second quarter of 2022, Generation Z has increased their share of home purchases by 9 percentage points, from 17% of all purchases to 26%.
Generation Z has a long way to go before catching up with its predecessors in Generation Y, who account for 50% of purchases.
So far, Generation Z has followed a path like that of the members of Generations Y and X, starting with rentals as they came of age and then beginning to transition towards home ownership.
In 2019, when the oldest members of Generation Z were 24 years old, the cohort had a small share of the market and accounted for just 3% of all homes purchased.
Today, the picture has dramatically changed and Generation Z is coming of age in the real estate market, making up 26% of all purchases.
For this generation to have the same rate of homeownership as prior generations, their share of purchases will have to increase to as much as 60% in the years ahead.
It’s natural that, as they begin purchasing their own home, they will count for a much larger share of the market.
Generation Z’s shift to homeownership
Gen Z has grown up. Many have moved out of the homes of their childhood, started careers and families of their own, and are starting to have children.
The next step is for a greater share to purchase their own homes, so they can build wealth and benefit from appreciation.
Of all the generations, Generation Z is the most likely to rent. That is fine for now because of their age. But it is going to have to start changing in the next few years, so they do not fall behind financially.
“Over the past two years, an average of 52% of Generation Z transactions were for rentals. By contrast, a much lower share than the other generations rented. Just 37% of Generation Y and 38% of Generation X transactions during the same period were for rentals,” said Ansari.
The shift from renting to homeownership is important because property ownership has been a lucrative investment over the past decade in Malaysia.
“The median homeowner saw the value of their home climb by RM136,716 during the 10 years to 2023. During the same decade, people who had a mortgage to purchase their home earned a median return of 66% on their investment,” he added.
Generation Z is a crucial generation
Generation Z is a vital generation because they make up one-quarter of the population of Malaysia. Only Generation Y is of a similar size.
Generation Z is the best educated and most internationally minded of all the generations in the workforce.
And given their relative youth, they have many prime earning years ahead of them, during which they will drive Malaysia’s economy, start businesses, and pay taxes.
“The members of Generation Z will each earn RM1.6 million in their lifetime and jointly they will add some RM13.4 trillion to the economy in the form of personal earnings. These estimates are based on the current median formal wage of RM2,645 per month and a 50-year career. It is not adjusted to account for potential future wage growth,” said Ansari.
How Old Is Generation Z?
Generation Z is the youngest cohort in the home market and were born between 1995 and 2009 and are from 15 to 29 years old.
Millennials, who are also known as Generation Y, were born from 1980 to 1994 and are between 30 and 44 years-old today.
He added that Generation X, with birth years from 1965 to 1979, is between 45 and 59 years old. The Baby Boomers were born between 1946 and 1964 and range in age from 60 to 78.
The oldest generation, the Builders, consists of those born before 1946. Builders are now 79 years and older. – Aug 12, 2024
Kashif Ansari
Juwai IQI Group CEO
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
Main image: jupiter.money
