Homeownership among millennials has risen to its highest level in more than a decade, driven by a significant rise in income among young people, according to recent research by the Institute for Fiscal Studies (IFS).
The IFS findings reveal a marked recovery in property ownership among 25- to 34-year-olds, which was at a low level in 2015. Since then, the proportion of homeowners in this age group has risen from 33% to 39% by 2022. Recording the highest rate since 2010.
The IFS attributes this recovery to faster growth in disposable income among young people compared to the general population. Adjusted for inflation, youth income has risen by 9% since 2015, compared to a 3% increase for the overall population.
Despite this progress, home ownership among people ages 25 to 34 is still much lower than it was in 2000, when it was 58.6%. The decline and subsequent recovery in homeownership was most pronounced among middle- and above-average-income households.
Jonathan Cribb, economist at the Institute for Fiscal Studies, commented: “The collapse of home ownership among young people has been central to policy concerns for some time – and it is not surprising that there will be around 20 fewer homeowners out of every 100 young people in 2022.” Compared to 2000.”
The long-term decline in young people's homeownership has raised concerns about UK housing supply, with critics saying not enough new homes are being built. Meanwhile, some have blamed millennials' spending habits for their difficulties saving for a deposit. Australian property developer Tim Gurner has criticized millennials for spending on things like avocado on toast and expensive coffee, suggesting this is hindering their ability to buy homes.
In related economic news, the value of the pound reached its highest level against the euro in almost two years, driven by expectations of sharp interest rate cuts in Europe. The pound sterling was trading on Wednesday at £0.85 against the euro, its strongest price since August 2022, after rising as much as 0.3% against the European Union currency.
The British pound has risen by 2% since the beginning of the year, as traders expect the Bank of England to implement smaller interest rate cuts than the European Central Bank. High interest rates usually attract international investment, thus enhancing the value of the currency.
The European Central Bank is expected to start cutting interest rates soon, with at least two cuts expected this year. In contrast, investors have only fully priced in the Bank of England's interest rate cut this year. Strong inflation numbers in services caused traders to delay their expectations for interest rate cuts, moving expectations from June to November.
The UK labor market has shown signs of recovery, with employment in the services sector 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 rise at above-average rates.
The upcoming general election also indicates that an imminent cut in interest rates is unlikely. Historically, the Bank of England has not cut interest rates immediately before a general election since gaining independence in May 1997.