By Joseph Wong

AS Generation Z (Gen Z) in Malaysia transitions from renting to home ownership, they face unique challenges and opportunities in securing their financial future. According to recent data from global property tech company Juwai IQI, Gen Z, born between 1995 and 2005, has significantly increased their presence in the housing market over the past few years. This generation, known for its digital savvy and global outlook, is now stepping into the real estate market, where home ownership has long been seen as a critical pathway to building wealth.

Juwai IQI co-founder and group chief executive officer Kashif Ansari emphasised the importance of this transition for Gen Z, noting that home ownership tends to contribute significantly to household wealth. “Generation Z needs to secure their financial future by following their older peers in making the transition towards home ownership,” Ansari explained. This transition is already underway, with Gen Z’s share of home purchases increasing from 17% in 2022 to 26% today. However, to match the home ownership rates of previous generations, Gen Z will need to increase their share of purchases to as much as 60% in the coming years.

Crucial turning point

The journey from renting to home ownership is not just a financial decision but a significant life milestone. For many in Gen Z, this shift marks the transition from living independently in rented spaces to establishing long-term roots in a property they own. Ansari pointed out that while Gen Z has so far followed a similar path to Generations Y and X—starting with rentals and then moving towards ownership—the challenge now is ensuring that they don’t fall behind financially as they age.

Over the past two years, Gen Z has shown a strong preference for renting, with 52% of their transactions being rental agreements. This is notably higher than the rental rates of Gen  Y (37%) and Gen X (38%) during the same period. While renting is a natural choice for younger individuals who are just starting their careers and families, the shift towards home ownership is crucial for long-term financial stability. Property ownership in Malaysia has proven to be a lucrative investment, with the median homeowner seeing their property value increase by RM136,716 over the past decade. For those with mortgages, the median return on investment has been 66%.

Gen Z’s importance to Malaysia’s economy cannot be overstated. They make up a quarter of the population, and as they continue to enter the workforce, their economic impact will only grow. This generation is the best educated and most internationally minded of all the generations in the workforce, and with many prime earning years ahead of them, they will play a crucial role in driving Malaysia’s economy, starting businesses, and contributing to government revenue through taxes.

On average, each member of Gen Z is expected to earn RM1.6mil over their lifetime, contributing a total of RM13.4 trillion to the economy. These figures, based on current median wages, highlight the significant economic power that this generation holds. As they begin to transition from renting to owning property, their influence on the real estate market will continue to grow.

Making their mark

It’s important to recognise that Gen Z is still relatively young, with members aged between 15 and 29 years old. This cohort is just beginning to make its mark on the housing market and as they mature, their role in the economy and the real estate sector will become even more pronounced. Comparatively, Millennials (Gen Y), who are now between 30 and 44 years old, and Gen X, aged 45 to 59, have already established themselves in the housing market, accounting for a significant share of home purchases.

Gen Z is at a critical juncture in their journey towards home ownership. While they are currently the most likely generation to rent, the transition to owning property is essential for securing their financial future and contributing to Malaysia’s overall economic growth. As they continue to increase their share of home purchases, the impact of Gen Z on the real estate market and the broader economy will only become more significant. The challenge for this generation will be to navigate the complexities of the housing market and make informed decisions that will benefit them in the long run. With their education, international perspective, and economic potential, Gen Z is well-positioned to meet this challenge head-on and shape the future of home ownership in Malaysia.