Asian millennials continue to seek financial security in real estate

KUALA LUMPUR (Feb 21): Some 45% of millennials continue to purchase properties across Asia to generate rental income for their retirement, according to the “Manulife Investor Sentiment Index” report.

Manulife's Investor Sentiment Index in Asia is a yearly survey measuring investors' views across eight markets in the region on their attitudes towards key asset classes and issues related to personal financial planning.

The latest survey found that many millennials continue to seek financial security through real estate.

However, Manulife’s Asia head of wealth and asset management Michael Dommermuth suggested that younger investors looking to address their retirement shortfall should reconsider their investments in the context of rapidly maturing, or already mature, real estate markets,.

He pointed out that while previous generations relied heavily on real estate for their retirement fund, economics and demographics mean that millennials today have to take a different approach.

“Millennials who invest in emerging Asia will likely fare better than those who buy a home in maturing Asia, where slowing growth and ageing populations can dampen real estate markets. They owe it to themselves to consider every option available to them in order to plan more effectively for their future,” he said.

The survey concluded that Asia’s millennials are naturally optimistic about their retirement, with 89% of respondents saying they expect to be able to maintain or improve their standard of living in retirement. 

“Many of Asia’s millennials may have grown up in an era of unprecedented economic development. With that prosperity comes a longer and better quality of life — and with that, higher expectations of the future,” said Manulife Asia president and CEO Roy Gori.

However, he stressed that young people today will need to start saving, and investing, sooner rather than later as the current understanding of retirement is quickly changing.

He reckoned a common rule of thumb is to accumulate around 25 times the amount one expects to spend in the first year of retirement.

Yet the survey showed that, on average, millennial investors expect to accumulate just 8.2 times their annual income by the time they retire. While this figure was higher than the regional average of 7.5 times, millennial investors are still well short of the 25 times benchmark.

The index is based on 500 online interviews each in Hong Kong, China, Taiwan, Thailand, Singapore, Malaysia and the Philippines, and 500 face-to-face interviews in Indonesia. Respondents are middle class to affluent investors, aged 25 years and above who are the primary decision maker of financial matters in the household and currently have investment products.