HENRYS And Real Estate Market
growth | Luxury real estate | November 2024
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Luxury real estate | Millennial generation | HENRYs
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HENRYS And Real Estate Market
HENRYS ARE ON THE RISE, and they're poised to make a splash in the next real estate cycle.
"What's a HENRY?" you ask. It's an acronym for "High Earners Not Rich Yet." HENRYs are typically made up of millennial (born between 1981 and 1996) and Gen X (born between 1965 and 1980) individuals who earn substantial income - over $250,000 per year, according to Wealth-X, an Altrata Company - yet spend most of their income on expenses and haven't built up enough assets to be considered wealthy yet.
As they build up their wealth over the next five years, many are expected to become first-time luxury homebuyers. Here is everything you need to know about the next generation of HENRYS - from their values to where they live, what they do for a living and where they could be headed next when they do finally take the plunge into luxury real estate.
WHO ARE HENRYS?
«High Earners Not Rich Yet» It means high-income earners who are not yet rich.
WHO ARE HENRYS?
The HENRY term dates as far back as 2003 , coined by writer Shawn Tully in a Fortune Magazine article. Generally, HENRYS are on their way or have the potential to build their wealth. With an average age of 43, many have only transitioned into earning high incomes within the last five years, and therefore not had time to accumulate a solid foundation.
They are more likely to be male, rather than female - with philanthropy, sports and extreme sports, outdoors and technology factoring high on their list of interests. They also tend to be digitally savvy and avid online shoppers. They also tend to live in major metropolitan areas, such as New York City.
In Iran, HENRYs typically reside in major cities like Tehran, Isfahan, and Shiraz, where diverse job opportunities and a more modern lifestyle are available. Their interests often include cultural activities, domestic and international travel, and participation in social events. They have a strong understanding of technology and digital tools, with active engagement on social media and frequent online shopping being integral parts of their lifestyle. However, similar to HENRYs globally, economic challenges and inflationary fluctuations in Iran often serve as obstacles to building sustainable wealth for this group.
In Iran, and particularly in Tehran, a similar situation can be observed. An individual with a high income, for example, around 900 million tomans per year, may be able to enjoy life by participating in recreational activities, dining at expensive restaurants, and traveling domestically and internationally. However, considering the high property prices in the city’s desirable areas, they may still feel unable to afford the home they aspire to own. Inflation, rising living costs, and currency fluctuations create additional barriers for these individuals to easily achieve their financial goals and desired lifestyle.
Philanthropy
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Philanthropy
Extreme sports
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Travel
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ASCENDING TO FIRST-TIME LUXURY HOMEBUYER STATUS
While the overall wealth of those with a $5+ million in net-worth declined 7% in the U.S. between 2021 and 2022 following stock market declines, HENRYs saw their population soar to nearly 9 million at a growth rate of nearly 13% during this same period. Wealth-X forecasts that this growth trajectory will continue through 2023 and into 2024.
"In recent years, there has been a notable rise in the count of individuals with high incomes, primarily attributed to the emergence of more complex job roles and investment prospects. Additionally, salary adjustments made to counteract the effects of inflation in the United States contributed to this trend in part," shared Maeen Shaban, Director of Research and Analytics at Altrata. "We think they could become a powerful group in the real estate market should they choose to exercise their ability to purchase a luxury property within the next few years. If you'd like, they are equivalent to 'first-time' homebuyers in the luxury sector."
As the number of individuals earning at higher income levels is expected to grow, the actual number of potential first-time luxury homebuyers is also likely to grow. Continues Shaban: "The hypothesis is that a majority of them have not made a luxury real estate acquisition yet - but will do so when they are at the right life stage or are financially able."
As this group matures and their wealth becomes more solidified, they are likely to turn their attention to making larger luxury purchases such as real estate as it typically coincides with 1) life stages such as settling down and starting a family and 2) their need for a luxury home that matches their aspirations or financial status.
Notes Winston Chesterfield, founder of UK-based strategic consulting firm Barton, which focuses on wealth and the luxury sector: "If you earn a very high income, particularly in high-cost cities like New York City, an entry level property is not going to be good enough for you. We've spoken to these people. Because they're young, they see the prospect of buying property outside of the city as a later purchase, perhaps when they start having a family. They could be earning money suitable for a mortgage now - perhaps they even own a small non-luxury property and are earning equity or are quite happy renting. It's just not at a luxury level yet."
As the number of individuals earning at higher income levels is expected to grow, the actual number of potential first-time luxury homebuyers is also likely to grow.
WHERE DO MOST HENRYS LIVE?
As previously noted, most HENRYS live in major metropolitan areas, where high-income jobs, culture and nightlife are plentiful. Not surprisingly, in the United States, New York City ranks at the top of the list, followed by Los Angeles, Chicago, Dallas and Washington, D.C. Somewhat paradoxically, some of these cities have the highest cost of living - thus driving the perception among HENRYs that they don't have enough wealth to purchase a luxury property at the moment.
"NYC is the best example of this conflict," explains Chesterfield. "A New Yorker could be earning $750,000 a year. They enjoy a certain kind of lifestyle where they are going out and having fun with their friends every night or going on expensive vacations. They're spending money freely and enjoying their financial success. Yet they feel like they can't afford to buy the kind of property they want in the city."
WHAT INDUSTRIES DO THEY WORK IN?
A sizable portion of HENRYS are gold-collar professionals or C-level executives in consumer services and banking, according to Wealth-X. The technology sector is also less influential than one might have previously thought.
As more tech companies entered the fray as high-income employers, the average age of HENRYS has dropped considerably over the last few years. "But when you look at the $1 million income level," says Shaban, "you will see that technology represents a smaller percentage. It's because tech is a comparatively young industry."
Tech's biggest companies may have become famous for paying high salaries to tech professionals over the last 10 years, but compared to established industries, the tech sector is still establishing itself. "Banking and Finance still tops the charts," says Shaban.
Further impacting the Wealth-X findings is what they consider "income." The firm uses taxable income in its analysis - not just from annual salaries, but also from dividends, rental income, etc. This is likely the reason why Banking & Finance suddenly jumps to the top of the list when the income level increases to $1 million+. "Banking and finance mostly consist of high-income salaried people, but it also includes people who are starting their own funds," adds Shaban.
WHAT NEEDS TO HAPPEN FOR HENRYS TO JUMP INTO THE LUXURY PROPERTY MARKET?
First, HENRY's likely need to reach a certain life stage, such as marriage or starting a family. Several recent studies have shown that young people are delaying these capstone events. According to Pew Research Center' analysis of Census Bureau data, the share of U.S. adults who are married by age 21 shrunk from about one-third in 1980 to 6% in 2021. The share who married by 25 dropped from nearly two-thirds to 22%. It's true for older millennials, too. The same 2021 analysis found that 25% of 40-year-olds in the United States had never been married, a significant increase from 20% in 2010.
However, marriage in Iran have also followed a global pattern of delays. In 1976, the average age of marriage was 24 years for men and 19 years for women. By 2016, these averages had increased to 27.4 years for men and 23.4 years for women. Furthermore, data indicates a substantial rise in the percentage of individuals aged 30–35 who have never married, climbing from 12.3% for men and 2.5% for women in 1976 to 35% for men and 29% for women in 2016. These demographic shifts, combined with economic pressures and the soaring cost of living, have posed serious obstacles for this group to access the luxury housing market and achieve homeownership.
They also need to achieve an optimum level of wealth in their city of choice. Current housing market dynamics, economic factors such as inflation and psychological roadblocks may also need to shift to alter their comfort level with such a large luxury investment. Chesterfield believes many will eventually convert to first-time luxury homebuyers in the next few years "when they are ready" and "once their lives have stabilized," either from starting a family or perhaps when their business has stabilized, if they are a business owner or entrepreneur.
Average Marriage Age In Iran
many will eventually convert to first-time luxury homebuyers in the next few years "when they are ready" and "once their lives have stabilized.
WHERE WILL THEY BUY?
When they do eventually decide to make a major property purchase, don't expect the same level of cross-market migrations that occurred during the height of the pandemic. "A lot of these people still need to be in the office," says Shaban, "so they tend to be more 'sticky' - a bit more locked into their locations."
If work-from-home was widely embraced during the pandemic, many employers such as Goldman Sachs, Amazon and Google have begun issuing return-to-office mandates - even if it's just for a few days per week. A survey of 1,000 company leaders by Resume Builder also found that 90% of companies planned to implement return-to-office policies by the end of 2024.
"Once they attain their wealth and have more capital control, they may decide to move out of the area," stipulates Chesterfield.
"But while they are high income earners, they are certainly a bit more constrained."
PREPARING FOR THE FUTURE
For HENRYs, the concept of luxury is not limited to high prices or well-known brands. They value authenticity, customization, craftsmanship, sustainability, and unique, exclusive experiences. These preferences play a significant role in their choice of home and lifestyle. For them, a home is a place that reflects their personal way of living.
In Iran, HENRYs similarly gravitate toward homes that align with their modern and cultural needs. They seek spaces with distinctive designs, advanced technologies, and areas that facilitate working from home. This is particularly important given lifestyle shifts, delays in marriage, and economic factors such as inflation and rising costs, which heavily influence this group’s priorities.
HENRYs look for homes that not only meet their aesthetic standards and personal tastes but also address their everyday needs. This demand is driving changes in the design and development of luxury real estate, pushing the market toward offerings with unique and modern features. It also fuels the growing interest in projects with advanced technological infrastructures and premium services.
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