Homeownership among millennials has climbed to its highest level in over a decade, driven by a significant rise in earnings among young people, according to recent research from the Institute for Fiscal Studies (IFS).
The IFS’s findings reveal a notable rebound in property ownership among 25 to 34-year-olds, which had been at a low point in 2015. Since then, the proportion of homeowners in this age group increased from 33% to 39% by 2022, marking the highest percentage since 2010.
The IFS attributes this recovery to a faster growth in disposable incomes among young adults compared to the general population. Adjusted for inflation, incomes for young people have risen by 9% since 2015, compared to a 3% increase for the overall population.
Despite this progress, homeownership among 25 to 34-year-olds remains significantly lower than it was in 2000, when it stood at 58.6%. The decline and subsequent rebound in homeownership have been most pronounced among middle-income and upper-middle-income households.
Jonathan Cribb, an economist at the IFS, commented: “The collapse in homeownership among young adults has been central to policy concerns for a while – not surprisingly given that out of every 100 young people there were 20 fewer homeowners in 2022 than in 2000.”
The long-term decline in young people owning homes has raised concerns about the UK’s housing supply, with critics arguing that not enough new homes are being built. Meanwhile, some have blamed millennials’ spending habits for their difficulties in saving for a deposit. Australian property developer Tim Gurner famously criticised millennials for spending on items like avocado on toast and expensive coffee, suggesting this was hindering their ability to buy homes.
In related economic news, the value of sterling hit its highest level against the euro in nearly two years, driven by expectations of sharper interest rate cuts in Europe. On Wednesday, the pound was trading at £0.85 against the euro, its strongest rate since August 2022, after rising by as much as 0.3% against the European Union currency.
Sterling has appreciated by 2% since the start of the year, as traders anticipate that the Bank of England will implement fewer interest rate cuts compared to the European Central Bank (ECB). Higher interest rates typically attract international investment, thereby boosting the value of a currency.
The 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 this year. Strong services inflation figures have caused traders to delay their expectations for a rate cut, moving predictions from June to November.
The UK job market has shown signs of recovery, with the services sector employment rising at the fastest pace in two years, according to a survey by the Confederation of British Industry (CBI). However, costs per employee continue to climb at above-average rates.
The upcoming general election also suggests that an imminent interest rate cut is unlikely. Historically, the Bank of England has never cut rates immediately before a general election since gaining independence in May 1997.
