KIEL / LONDON (IT BOLTWISE) – A current study by the Kiel Institute for the World Economy shows that millennials have to save significantly more equity to buy property than the baby boomer generation. While baby boomers in the 1980s had to pay around 1.7 times their annual income for an apartment, millennials had to pay more than three times as much. Despite similar mortgage burdens, increased property prices and economic uncertainty are making access to home ownership more difficult.
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The financial challenge Millennials face when purchasing real estate has increased significantly compared to previous generations. A study by the Kiel Institute for the World Economy (IfW Kiel) shows that the Millennial generation, born between 1980 and 1995, has to save more than three times their annual income in order to buy an apartment. In comparison, baby boomers in the 1980s only had to pay about 1.7 times their annual income.
This development is primarily due to the sharp rise in real estate prices, which have been rising continuously since 2010. Despite lower interest rates partially offsetting the mortgage burden, access to homeownership remains a major hurdle for many Millennials. The study shows that the mortgage burden for Millennials who entered the market between 2015 and 2024 is about 25 percent of their income for condos, a small difference compared to the 20 percent of the baby boomer generation.
Another factor making equity formation difficult is economic uncertainty, which is exacerbated by global events and market volatility. Millennials face the challenge of saving in an economic environment characterized by uncertainty, while baby boomers made their home purchases in a more stable economic period. These differences in economic conditions contribute to Millennials having to save longer to raise the necessary equity.
Experts warn that this development could have long-term effects on the real estate market. The lower purchasing power of Millennials could lead to a shift in demand, which in turn could influence price developments. In addition, the delay in purchasing home ownership could have an impact on retirement planning and financial security in retirement. It remains to be seen how these trends will impact the future generation of home buyers.
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