Baby Boomers, Millennials and house prices: perspectives and living arrangements.
Millennials are often criticised for their apparently huge sense of entitlement and lack of work ethic. Just as regularly, we read about how it’s impossible for them to leave their parents’ homes and buy their own places. Sweeping generalisations both, but take a step back and the bigger picture suggests we’re in a period of transition.
In the not too distant past, young people would be able to see an opportunity for long-term financial security by following the trend their parents set and stepping on to the ‘property ladder’. Today, Baby Boomers may live into their 90s, and often their children simply don’t see home ownership as a possibility – until, and if, they inherit.
Early Baby Boomers may have been the last generation ever to enjoy a final salary pension. Even the last Boomers don’t have that prospect. And Millennials can’t afford to buy a house.
So, do we wait for younger generations to catch up, or make the system easier to penetrate? Do we limit the amount of property an individual or company can hold?
Do we incentivise first-time property purchase, or wrap more utility into a house as a single purchase?
Is the only answer for the price of property to drop?
Here’s what I think. As long as older generations maintain their material ownership, and hold their successors at arm’s length, the opportunity for their value system to be rejected is developing. After Millennials give up trying to buy houses, Baby Boomers will realise that their investments aren’t appreciating to plan because the market is slow. That’s when the buying power will shift to the new market entrants.
Reading trends like this might sound improbable, but it all depends where you see it from. Market adjustment has happened before. Remember MIRAS tax relief? Mortgage interest rates at 15%? Negative equity? Static market conditions?
If you don’t remember any of this, here’s where a longer-term view of things is useful. Sometimes, looking back to see forward can be a very useful tactic indeed.
There’s a cyclical nature to some trends that isn’t always obvious unless we see it from the perspective of consumers – all the consumers, and segments of consumers.
House prices is one example. Student loans is another. Introduced at a low interest rate, the UK system of making students pay for tuition by taking out loans has been variously reported. But let’s have a look at a few small signals: one of the most successful institutions, in terms of making further education more widely accessible, has been the Open University (OU). The OU now charges students more than it used to for courses, making its fees comparable with other establishments.
The OU appeals to mature students. The number of over 50s is growing to a level never seen before, and yet the OU is in financial crisis because its target audience can’t afford the tuition fees. They may be property rich, but Baby Boomers are relatively cash poor.
Here’s a random fact: the number of over 50s working in the UK today equals the entire population of Sweden and makes up over 30% of the total UK working population. And the OU, that pulls from this exact audience, is reported to be in trouble.
This is one example of a connected insight. The factors that have led the over-50s to need to work later into life than their parents won’t improve for their children. The longer we live, the longer we work. The longer we work, the more we must keep up with developing technology and the more education we need to stay relevant in the market place.
This is how room44 sees things differently, and how we can help you connect the dots in a different pattern to your competitors, and give you the commercial edge.
Seeing it differently. Innovation justified. It’s what we do.