Millennial homeownership in the UK has reached its highest level since 2010. This resurgence is driven by a significant increase in wages for young adults, outpacing the general population.
The Institute for Fiscal Studies (IFS) has highlighted this trend, showing a notable rebound in property ownership among 25 to 34-year-olds. Their disposable incomes have grown faster than other age groups, contributing to this recovery.
Significant Increase in Homeownership
Homeownership among 25 to 34-year-olds has seen a remarkable increase, reaching 39% by 2022. This marks the highest percentage since 2010, a notable rise from the 33% recorded in 2015.
This positive trend is attributed to the faster growth of disposable incomes among young adults. Adjusted for inflation, their incomes have risen by 9% since 2015, compared to a 3% increase for the overall population.
Challenges and Concerns
Despite this progress, homeownership among millennials remains lower than in 2000, when it was 58.6%. This decline and subsequent rebound have been most pronounced among middle and upper-middle-income households.
Jonathan Cribb, an economist at the IFS, commented: “Out of every 100 young people, there were 20 fewer homeowners in 2022 than in 2000.”
Debate on Housing Supply and Spending Habits
The long-term decline in young people owning homes has raised concerns about the UK’s housing supply.
Critics argue that not enough new homes are being built to meet demand.
Meanwhile, spending habits of millennials have been scrutinised. Some blame their expenditures on items like avocado toast and coffee for their challenges in saving for a property deposit.
Economic Context
In related economic news, sterling has hit its highest level against the euro in nearly two years. This is driven by expectations of sharper interest rate cuts in Europe.
Higher interest rates typically attract international investment, boosting the value of the currency.
The pound was trading at £0.85 against the euro, its strongest rate since August 2022.
Interest Rate Predictions
The European Central Bank (ECB) is expected to begin cutting interest rates soon, with at least two reductions anticipated this year. In contrast, investors have only fully priced in one rate cut from the Bank of England.
Traders have delayed their expectations for a rate cut from June to November, influenced by strong services inflation figures.
UK Job Market Recovery
The UK job market has shown signs of recovery, with the services sector employment rising at the fastest pace in two years.
However, costs per employee continue to climb at above-average rates.
Historical Trends in Interest Rates
Historically, the Bank of England has never cut rates immediately before a general election since gaining independence in May 1997.
Millennial homeownership is experiencing a resurgence, driven by rising wages among young adults. However, challenges remain, such as the lower levels of ownership compared to two decades ago and concerns about the housing supply.
The economic context, including interest rate changes and job market trends, continues to influence this demographic’s ability to purchase homes. Understanding these dynamics is crucial for future policies and market predictions.