The key to understanding any market, any business, is people. The people who are investing in your business, the people who are funding your operations, the people who are working for you, those who are competing against you, and most importantly- those who are buying your product or service.
Navigating the ever-evolving landscape of real estate requires an strong understanding of demographic trends. Population growth, migration, changing preferences of the newer generations, and socio-economic shifts have a profound impact on the demand for housing and commercial spaces.
Urbanization, cultural shifts and aging populations have compelled property managers to discard outdated business manuals and adapt their strategies to meet the needs of a more diverse demographic. In this article, we will look at the demographic trends that have caught the attention of real estate investors, and strategies for playing them to your advantage.
Importance of Adapting to Changing Demographics
Understanding the demographics of your geographical area is essential for you to tailor your services to the needs of your potential clients, keeping your existing tenants happy, keeping your head above the tremendous competition in the real estate industry, and gauging the long term sustainability of your properties.
Impact of Demographics on Property Management
Aging Populations and Housing Needs
A report by the US Census Bureau noted that by 2050, the number of older Americans is projected to be 85.7 million. This number has been steadily increasing since 1960, with a steep rise expected in 2030. The same report also acknowledged that many housing units that are designed for older people lack critical features like hand rails and grab bars in the bathroom.
In this context, there is a growing demand for homes that are easy to use for senior citizens. Such houses typically feature a single-story layout, fewer steps, wide doors and hallways that can accommodate wheelchairs, door handles and faucets that can be operated with limited strength, and so on.
Millennial and Gen Z Housing Preferences
In the past decade, it has become increasingly clear for millennial and Gen Z citizens that it is way harder for them to buy a house, than their parents and grandparents. This phenomenon has been widely reported across various news and finance platforms. The earlier generations definitely benefitted from lower rates, and it might be a long time before housing becomes affordable for young investors.
In this context, prospective Gen Z homeowners have one important criterion as their top priority- affordability. Gone are the days when people used to move into starter homes, which they could sell for building their dream house. Now, when the newer generations approach a realtor, they want a home where they can stay put for the next decade or two.
Flexible financial options like lower down payments, FHA loans, etc. are also attractive features for this population. Also, they may be more open to unconventional arrangements like shared living spaces, and are also attracted to newer features like smart technology enabled home appliances.
Urban vs. Rural Living Choices and Rental Market Demand
Urban and rural housing both have their own pros and cons. Urban areas provide easier access to amenities, job opportunities, transportation and infrastructure. Suburban and rural areas offer larger living spaces, access to nature, and quiet and peace.
Despite its appeal to the younger generations, lesser people are opting for urban housing because of its soaring prices. Instead, more people are turning toward suburban and rural housing markets, partly because they offer more affordable options, and partly because the pandemic has highlighted the importance of larger living spaces.
Strategies for Adapting to Demographic Shifts
Data-Driven Decision-Making
Data-driven decision-making means gathering insights from reports of how your property has performed in the past, and using this knowledge to increase your profits in the future. Many property management software companies advertise reporting and analytics as a star feature of their service packages.
For example, you hire a firm to give you research-based insights on the demographics of your area from a real estate perspective. You discover that the demographic of the town is changing; there are more young people who are migrating for university and are looking for short term rentals. They prefer affordable options like dormitories and co-living spaces. Now you can start directing your efforts to such housing options, so that you can benefit from this shift in local demographic.
Personalized Tenant Engagement Strategies
You can analyze your tenants in terms of their age, lifestyle, cultural background. You can reach out to them through different channels like newsletters, social media groups and community events. Visual content and short form text through TikTok, Snapchat, etc. appeal to younger residents. Older tenants may prefer more traditional forms of communication like physical newsletters, bulletin boards, and social meetups.
The US Housing Market
Let’s take the example of the US housing market. It has been hit by dramatic rises in mortgage rates, increasing taxes, lack of affordable housing, resulting in limited access entry to younger homeowners. Moreover, there is a tough competition from the older generations, who are also buying.
2023, especially, saw the housing market hit record levels of high mortgage rates and real estate prices. Current homeowners are locked in at low rates, and they don’t seem ready to sell, leading to locks on inventory. The prices, as a result are skydiving.
While some experts say that 2024 may offer a better atmosphere for home buyers in the market, there is largely disagreement over this. In this context, you, as a property buyer, are standing on an opportune moment. There are hundreds of young home buyers who are willing to spend on property, and they are flexible in their requirements, as long the deal is affordable.
Many single member households may shift to paying guest accommodations, shared living spaces or hostel-style living arrangements, as they navigate job opportunities in new cities. Such housing options may be worth looking into.
Understanding the demographics of your real estate customer base requires you to go on a unique journey to research your geographical area. Every locality has its own identity, with diverse needs and preferences. Being connected to the community and spending time to carefully research your target audience is certainly worth investing your time in!
