In today's Japanese society, values regarding real estate are changing dramatically, especially among the younger generation, especially the Millennial Generation (born in the 1980s to mid-1990s) and Generation Z (born in the late 1990s to around 2010). In the past, owning one's own home was considered a sign of success, and many people made it their goal. However, today's young people are not necessarily concerned with "ownership," but rather are increasingly emphasizing "experience" and "freedom" in their lives.
In this article, INA & Associates, Inc. explains how this new generation's view of housing is affecting the real estate market and how we in the real estate industry should respond to it, in plain language and with expert knowledge.
Generation Z is a "digital native," meaning that they have been familiar with digital technology and social networking since birth. Their values are distinct from those of earlier generations in the way they access information, communicate, and make lifestyle choices. At the root of this generation's thinking about housing is an orientation toward seeking the richness of "things (experiences)" rather than "ownership of things.
Rather than a lifestyle tied to a single location, they want to flexibly change where they live in accordance with their career plans and changing life stages. With lifetime employment no longer the norm, and career change, independence, or even overseas migration becoming realistic options, "owning" real estate with a long-term mortgage of 35 years or so can be seen as a "risk" that restricts one's freedom in life.
This shift in values is also reflected in the actual data. A survey by Recruit Co., Ltd. shows that a higher percentage of Generation Z prefers to rent compared to other generations. This does not mean, however, that they are simply reluctant to purchase a home. Rather, they have a dispassionate viewpoint that evaluates real estate not only as a "place to live" but also as an asset.
The shift in values from "ownership" to "experience" is driving structural changes throughout the real estate market. These changes range from the rental market, to the buy/sell market, to real estate-related services.
The increase in the number of Generation Z and Millennials, who are less reluctant to change their residences, is directly related to the revitalization of the rental market. They are looking not only for a place to "live" but also for rental properties with high added value, such as furnished apartments, properties with co-working spaces, and "social apartments" with services that support community building.
In order to meet these needs, property owners and management companies are being forced to focus on renovating their properties and expanding their services.
On the other hand, the younger generation is not entirely uninterested in purchasing real estate. According to a household survey by the Ministry of Internal Affairs and Communications, the percentage of homeownership among those in their 20s has been increasing for seven consecutive years, reaching a record high in FY2023. This is an indication that they are seeking financial stability for the future and are increasingly viewing real estate as an "asset.
Especially in this era of low interest rates, starting real estate investment at a young age is perceived as a reasonable option to prepare for the future. They tend to choose properties in central Tokyo or near train stations, where asset values are less likely to decline, even for residential properties, with an eye to future sales and rental operations.
Without being concerned about newly built properties, they are also active in purchasing pre-owned properties and renovating them to suit their own lifestyles. They feel that an existing property that can reflect their individuality has more "experience value" for them than a new property with a uniform floor plan. This trend is fueling the revitalization of the existing home market and the growth of the renovation industry.
In order to respond to these market changes, we in the real estate industry also need to break out of our traditional business model and offer new value.
The first is to provide flexible housing solutions. In addition to traditional long-term mortgages, the company must offer new types of contracts that fall between ownership and rental, such as short-term rental contracts or "lease-back" and "shared housing. This will allow customers to flexibly choose the most suitable housing option to suit their own life plans.
Second, we plan and broker properties that enhance the value of the experience. We need to go beyond simply explaining the specifications of a property and offer concrete proposals of what kind of "experience" can be had in that property. For example, it is essential to be able to make proposals that are in tune with the customer's lifestyle, such as "a property with a garden where you can fully enjoy your hobby of DIY" or "a property with a spacious living room where you can invite your friends and have a home party.
Third, it is important to create a new customer experience that leverages technology, such as virtual reality (VR) previews, AI-based property matching, and online contracting procedures, to create an environment in which customers can search for a home more smoothly and comfortably. This is an extremely effective approach to improve customer satisfaction among the younger generation of digital natives.
In this article, we have discussed the changes in real estate values due to the rise of Generation Z and Millennials and their impact on the market. They are not bound by traditional values of "ownership," but value "experiences" that enrich their own lifestyles. This change poses a major challenge to the real estate industry, but also brings new business opportunities.
What is important is to redefine real estate as a "platform" for enriching the lives of individual clients, rather than as a mere "object. As real estate professionals, we at INA & Associates, Inc. are committed to continually providing the best solutions to our clients so that they can realize their ideal lifestyles.
Please feel free to contact us if you have any questions about buying, selling, or renting a property, or if you have any concerns about how to live in a home that fits your life plan. Our professional and experienced staff will be happy to provide you with personalized solutions.