The so-called “baby boomer generation” has been an integral part of the US economy for many years. This relates to individuals and families who grew up in a time of prolonged economic growth, an exceptional period for real estate investment and are now into retirement. This generation has had a massive impact upon the US economy and there are signs of growing influence on the UK economy.
So, how can those from the “baby boomer generation” have such a prolonged long-term impact on economies and property markets?
If we look back towards the 1980s this was a period of sustained economic growth for the UK property market, the right to buy policy of the Conservative government and general period of well-being. Historically many people grew up in the family home and when the children finally left to spread their wings parents would downsize to reduce their living costs going forward. Looking back through history this has been repeated time and time again but the excessive wealth of those living through the “baby boomer generation” seems to have put all other trends to shame.
Downsizing not as popular
The idea behind downsizing was that as older families/couples decided to cash in their larger property and take a smaller one, this would offer new stock for those looking to go in the opposite direction. In many ways this shuffling of the property market pack ensured there was property for those looking to downsize and those looking to upsize. The status quo remained for many years but recently we have seen significant change.
There is evidence to suggest that those from the baby boomer generation are not in a rush to downsize their property. Indeed a survey in the US by the Federal Reserve suggests that a phenomenal two thirds of the US home equity market is controlled by those aged 55 and over. This perfectly illustrates the financial power of those from this generation.
Is this a new long-term trend?
The difference between the price of a property back in the 80s and the cost of a property today is phenomenal in some of the U.K.’s more popular real estate markets. As a consequence, many from the baby-boom generation have repaid their mortgage leaving a fully paid-up asset which continues to grow in value. On the surface, perhaps there is no reason to suggest that this new trend will change but below the surface this may not exactly be set in stone.
Those who acquired property after the 1980s will likely have nowhere near the same difference between what they paid and the value of their property today. Indeed many people have fallen into negative equity due to the economic fluctuations of recent times. So, while you will still see the baby-boom generation having an impact upon the property market, and the UK economy as a whole, this may not be a trend which will continue forever and a day.
The US authorities take the baby-boom generation very seriously and there is evidence they are having an impact upon the UK property market. These are individuals/families from an era which saw phenomenal property price growth, readily available mortgages and for many people the “right to buy” policy of the Conservative government helped them onto the property ladder. The situation is very different for those who acquired property after the 1980s with many having fallen into negative equity.
While there is no doubt that the reluctance of baby-booms to downsize their properties has led to supply issues there is also no doubt that fewer people are now looking to upsize in the short to medium term. On the whole the UK markets chronic shortage of suitable property is an issue unlikely to be resolved in the short term.