Enrique Suárez
Co founder
MountX Real Estate Capital
Startup Contributor

The Next-Generation Digital Future of Real Estate

By Enrique Suárez | Tue, 08/24/2021 - 13:00

We have all heard about the phenomenon of millennials and about the disruption that centennials are causing in the world. But specifically, who are these generations and how are they transforming the future of real estate?

Although there are no strict dates, Generation Y, or millennials, is made up of all people born between the years 1982 to 1999, while Generation Z, or centennials, is made up of those born after 2000.

You may wonder, what does this have to do with real estate and with businesses related to this well-established and traditional industry? I can assure you we are starting to see a new era in real estate. 

Every generation influences the economy but Gen Y and Z have grown up in a time of rapid economic change, which gave them higher career expectations than previous generations. Millennials are, in fact, poised to reshape the economy. They are often referred to as the “instant-gratification generation,” with high expectations for their professional and personal lives.

Gen Y and Z are also the first truly digital generations, raised amid laptop computers, cellphones and rapidly advancing technology that is changing the way individuals interact and conduct business. Among other things, technology is altering where and how new consumers get their information. Global interconnectedness has also left millennials and centennials increasingly reliant on peers for information and motivation.

Millennials will soon make up the largest share of the labor market: It is projected that by 2025, three out of every four workers globally will be millennials. Their financial behavior will more greatly affect the global economy than the financial behavior of the generations that preceded them. We can be certain that the power of purchase, investment and consumption will be concentrated in these generations.

Is the real estate industry ready for this new consumer?

This new generations prefers to use their savings to live experiences rather than to buy a house or saving for building a house in the future; they choose the home office and work flexibility over attending an office; 36 percent are interested in working abroad; they have a nomadic DNA, which makes them reluctant to live their entire lives in the same city or house; the concept of workation (work and vacation) is gaining more and more relevance.

Gen Y and Z see sustainability and environmental impact in all aspects of daily life. They are aware of the consumption of resources such as water and energy in homes and corporate buildings; they have no children or will have fewer than previous generations; they will not last with the same partner for the same period as the baby boomers or Gen X.

What do these buyers want when it comes to their homes? “For Gen Y and Z, wellness is a daily active pursuit,” according to Goldman Sachs, which concluded that, “their active lifestyle influences trends in everything.” That would certainly include their housing preferences.

In their home-buying decisions, neighborhood quality and safety ranked highest for millennials and centennials and healthy homes ranked closely below, followed by closeness to open space, walking trails and activities, all of which point to the health potential of communities.

The interest in health extends to an interest in creating a healthier planet. They have a preference for gardening, composting and cooking organically; all three blend wellness and sustainability. Healthy homes to this generation include smart home technology, home fitness spaces and large yards. The home’s community setting should ideally include gardens, rooftop amenities, co-working spaces and outdoor dining.

When shopping, Gen Y and Z are digital natives who fully embrace e-commerce and omnichannel retail. They use the internet to research products, gather feedback on potential purchases and search out the best prices. Ninety-five percent of Gen Z read reviews online while shopping and half will not buy the product if they do not find enough reviews on it. This behavior is also applied to real estate. We are facing a much more informed consumer, with unlimited access to offers of different properties, prices, characteristics and amenities.

Online activity has become second nature to most of this generation, which is no surprise considering that they were born during the tech boom. Growing popularity and the ease of mobile accessibility has made sharing information on-the-go as simple as a status update. The world has changed and to connect with this generation you must Get social, Get visual and Get mobile; in a nutshell, Become Digital.

Waiting Longer to Leave

Leaving home is a seminal moment for many young adults. It generally occurs during a person’s 20s and usually coincides with the end of college, starting a career or developing an intimate relationship. Today’s millennials and centennials, however, are waiting longer to leave the nest. Nearly half of millennials still live with their parents in the family home. And half of those actually moved back to the nest after having left once — the so-called boomerang babies.

Delaying the decision to move out isn’t the only way in which millennials’ “life cycle” may be different from those of previous generations. It’s clear that his generation is also marrying and starting families later than their parents and grandparents did. In the 1970s, the average age of a first-time bride was 23. Today, she is 30.

So, what about the millennials who are living independently? Do they rent or own? According to CBRE, about a third are renters, while only a small share are homeowners. This trend seems to support the widespread belief that millennials are choosing renting as a lifestyle choice — to maintain freedom from the responsibilities of homeownership. This has led some to tag millennials as “Generation Rent.”

However, that statement may not be as straightforward as it appears: the majority of millennials state they are renting out of financial necessity. Most of them rent not because they want to but because they face significant challenges in finding affordable places to live. Many are choosing to live at home, or to rent, because they can’t afford to buy their own homes.

Across generations, it is clear that the flexibility afforded by renting is a growing attraction particularly for those who want to immerse themselves in urban life and, therefore, choose to live in expensive city centers. Overall, though, the new generations rent out of necessity driven by a lack of affordability rather than by choice, and even then, they are forced to compromise on where they live. This unsatisfied demand presents one of the most significant challenges and opportunities to the real estate industry.

Conventional real estate techniques have long become outdated. For a long time, we have been trying to optimize the existing industry with current tools at hand instead of inventing new innovative ways to do so. The result is a highly exclusive, illiquid and inefficient industry with a hoard of other concerns.

It seems highly unlikely that the tech-savvy new generations would be willing to invest in this form of brick-and-mortar structure. Amid the increase in the cost of living and the changing nature of work, the millennials are not intensely focused on buying a home for the purpose of living in it or retirement. In fact, millennial investors are doing quite the contrary. By investing in real estate, they are using their investment as a cash-flow generator to amass wealth – and eventually, reach the "retirement at 40" goal.

Now, with a new innovation at hand, there is a better way to do things using technology to transform the real estate sector. Real estate is evolving into a multifaceted investment vehicle for growing wealth.

Welcome to the Digital Real Estate Era

What if, instead of taking another loan to fit the needs of a house, you could invest in any real estate property with an extremely accessible amount? What if a new generation investor has the chance to get greater and instant returns on a real estate asset instead of their traditional investments, like stocks and bonds?

This is what tokenization in real estate provides and it checks all the right boxes of any millennial’s list. Simply put, tokenization enables the digitalization of a real-world tradable asset, such as a real estate property. Through smart contracts and blockchain, the concept of tokenizing a physical property is now possible. Moreover, blockchain enables this conversion of an asset into a token seamlessly and further helps drive value into an illiquid asset.

Let’s look at why the new generations would be interested in this new way of getting into real estate.

A Global Online Market

More than 90 percent of millennials and centennials own a smartphone, out of which 97 percent use active internet. Digital tokens are raised on a blockchain platform that represents shares of a greater real-world asset. These tokens are further traded on an international platform with the help of smartphones and the internet. Tokenization ensures that even intangible real estate assets can be as easily traded as the stock market shares of an organization.

Accessible Investment

Gen Z and Gen Y do not want to burden themselves with housing mortgages. However, tokenization allows them to buy shares (security tokens) of a real estate property. Furthermore, they can earn attractive returns from a real estate investment in the form of steady rental income or price appreciation of a property. This makes tokenization a much more accessible investment as compared to the traditional investment option in real estate.

Instant Liquidity

Another factor that has made real estate investment a distant affair for millennials is the lack of liquidity. Moreover, investment remains stuck in a brick-and-mortar structure before finding a suitable buyer who meets our needs on pricing. Tokenization enables the buying and selling of digital tokens on a secondary online platform that can instantly release liquidity out of an illiquid asset.

Growing Interest

Research conducted in the last year` all seem to indicate that millennials are increasingly looking at cryptocurrency as a favorable investment option in contrast to stocks, government bonds and other traditional forms. Security tokens based on blockchain become even more attractive than utility cryptocurrencies owing to the fact that they represent an asset that has real value. This boosts the growing interest and makes tokenized real estate a much more interesting investment option than the conventional system.

A concept like tokenization and blockchain represents what the internet did 25 years back. A relative few believed in its potential while the majority called it a passing invention. But, these concepts have already started to transform the real estate sector. In PropTech, which itself is predicted to rise exponentially, tokenization is one of the trends that is expected to receive a major boost in the coming decades. In 2018, the market for security tokens rose to $442 million dollars. According to HSBC, the market for globalized tokenization is expected to reach $27 trillion by 2027.

Companies like MountX Real Estate Capital have already started developing solutions for tokenization in real estate, creating the next generation of digital financial products to enable access to international real estate investing to 140 million millennials in Latin America. MountX successfully tokenized the first real estate in Mexico and has opened a new opportunity in Toronto, Canada. For more information you can contact them at team@mountx.io

Welcome to the digital real estate future.

Photo by:   Enrique Suárez