The American Dream in China – Introduction
Millennials in China are living the American Dream of homeownership. A new survey shows that Chinese Millennials are almost twice as likely to own their own homes as young U.S. adults, but the reason behind this real estate trend is “not” what you might expect.
An HSBC survey shows that China has the highest rate of Millennial homeownership in the world — at 70%. There is no other country with a Millennial homeownership rate above 46%, and that 46% is in Mexico. In the United States, just 35% of Millennials own homes.
The desire to own a home is high everywhere, however. Between 80 and 94% of Millennials that don’t own homes plan to buy homes in the next 5 years. France is the only country where just 69% of non-homeowners have plans to buy.
But even in this group, Chinese Millennials have a much higher desire to own their own home than U.S. Millennials. Among the young Chinese, 94% of non-owners want to buy while just 80% of young Americans feel the same way. The HSBC survey analyzed the homeownership rates of 9,000 Millennials in 9 countries.
So, what makes the situation in China so different in terms of current ownership among Millennials? According to Money magazine, it’s a “gender gap”.
The Chinese “Gender Gap” & Homeownership
Money magazine writes that homeownership in China goes well beyond the desire for a place to live. It writes that in China, by the end of the decade, there will be 30 million more adult men looking for a wife than there are women looking for a husband. That’s creating fierce competition among the men, and it says that “owning a home” can help them win their prize.
But that doesn’t mean that they are running out and buying homes with their own money. Money magazine writes that parents and other relatives are stepping in to help out. Fortunately for these relatives, China has had a “one child” rule until recently, so many families have just one child to take care of.
The other side of that coin is that “most” of those only children are male. That’s due to another cultural component with roots in the mid-19th century. History books say that female infanticide was common back then because of a widespread famine, too many mouths to feed, and a preference for baby boys.
That preference for a son has prevailed over time, but in recent decades, families have been able to use ultrasound during early pregnancy to determine the sex of the fetus. Thanks to an easy abortion policy tied to the one-child law, many female fetuses have been aborted.
So now, there’s a severe “shortage” of marriageable young women and a perception that a man is more attractive if he owns a home. So parents and other relatives will all pitch in to help that only son.
Trulia’s chief economist Ralph McLaughlin says: “Parents and grandparents will often pool their money together to invest in that child by buying a property in that child’s name.” As Money magazine writes, the difference in homeownership rates among Millennials in the U.S. and China is less about financial capability and more about cultural expectations.
U.S. Millennial Homeownership
Millennials are up against a whole different set of circumstances here in the U.S. Many are struggling to pay off student debt and to keep up with increasing monthly rents. That makes it difficult to save for a down payment. And for those who have a little cash in the bank, there’s a limited supply of less expensive “starter homes” available. They may also lack the required credit history score needed to get a loan. NAR chief economist Lawrence Yun says in Money magazine: “The younger generation took a bigger hit long-term in the housing downturn.”
Money magazine also pointed to another theory by Australian millionaire and real estate investor Tim Gurner. He claims… that one of the reasons for the low homeownership rate among millennials is their pension for the quote “pricey, popular superfruit commonly known as the avocado.” He says: “When I was trying to buy my first home, I wasn’t buying smashed avocado for $19 and four coffees at $4 each.” Gurner says young people today want to eat out every day, travel to Europe every year, and dine on expensive avocados.
He’s not the only Australian with this opinion. Money writes that Australian columnist Bernard Salt recently criticized young people who order: “smashed avocado with crumbled feta on five-grain toasted bread at $22 a pop.” He says 22 dollars several times a week could go a long way toward a deposit on a house.”
I have certainly noticed this propensity for fine dining with my own Millennial daughters. My teenager is more likely to spend $20 on lunch with her friends than going to a movie or out shopping. My 24 year old daughter is a foodie as well, but she is also a saver. In fact, Karina has enough money now to buy her first home with an FHA loan. She has a two year job history, great credit and no debt. Most importantly, she sees she can live in a nicer home for less than what she pays in rent. That’s because she’s in one of California’s more affordable markets (a rarity!)
She also just bought a puppy yesterday and now wants a yard. This appears to be another trait among Millennials – they love their pets like they are their own children…. And that may drive more of this population into the suburbs over the coming years.
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