Demographics play a big part, perhaps the dominant part, in how residential property markets function. Demographics are usually defined in familiar terms including age, employment and education. There are two groups, often broadly described as ‘inter-generational’ groups, that attract a lot of attention.
They are Baby Boomers and Millennials and the ‘Henrys’. The Henrys are described as high-income Millennials who have ‘extra funds’ and enough money to travel, luxury goodies and activities, but still say they feel broke. They are people who want financial security including assets like a home. They remind us of that familiar group who desire to own a home but are still wanting to keep their smashed avocado on toast.
Each of these two groups sit at almost the extreme opposite ends of the housing demand profile however both groups, in very different ways, impact affordability.
What’s also interesting is that while the market is being twisted and turned in many different directions by the current pandemic, trends among Boomers and Henrys are also evolving.
Boomers Control a Big Chunk of the Market
It’s generally well known that Baby Boomers have the most real estate wealth. In Australia 82% of those born between 1947-1951 own their homes, while of those born between 1982-1991 only 37% do.
However, some figures out of the USA show that this trend is also reflected in the different concentration of real estate wealth among similar age groups.
Between 1990 and 2000, the silent generation (those born before 1946), had the most real estate wealth sitting above 60% between 1990 and 1994. At the same time the Boomer’s share stood at 32% – 36%, while the Millennial’s share was naturally 0%.
However, that trend changed in 2001 when the Boomers reached 45% and the silent generation’s share started to decline standing at just above 13% in 2021 and the Boomers at 44%. It’s only natural considering that death rates among the silent generation were on the rise.
For Millennials their share of real estate wealth stood well below 2% until 2010 when their share started to rise steadily to reach 11.2% in 2021. It is worth noting that the Boomer’s share has been relatively static over the last twenty years after peaking in 2011 at 49.1%.
The concentration of wealth with the Boomers is not unexpected as it aligns with their maximum earning capacity and much of that wealth was also inherited from their parents, the silent generation.
As a result of the concentration of wealth, with the Boomers there is, however, a flow-on impact onto the total housing market. And it’s a trend that has been made more intense in the face of Covid-19 and it is the trend for aging in place.
This affectively freezes some parts of the housing market as Boomers steer away from nursing homes or selling up and moving to smaller and or less expensive housing and locations.
But with the number of deaths in nursing homes, who could blame them. Nonetheless, as Millennials seek a greater share of the market they are perhaps being partly frustrated by the Boomers.
Our local residential market reflects these same trends. It is perhaps in part what encouraged our Federal Treasurer to recently suggest that Boomers here should spend more of their money, including the wealth tied up in the family home, presumably by selling.
Gen X, those born between 1965 and 1980, are the second biggest group in this matrix with their share of real estate wealth at 31.2%. Figures that are not far behind the Boomers but well ahead of the Millennials. Gen X are also complicating the picture as the number of buyers and sellers (in the US figures) are much the same. They are marking time, and at least until recently have not seen big capital gains.
Henry is short for High Earners Not Rich Yet.
Though the term was first coined in a 2003 Fortune magazine article, it has since come to portray a growing class of mostly high-income Millennials. A demographic often described as wanting to maintain a particular lifestyle. A lifestyle focused (pre-Covid-19 at least) on traveling, eating at a trendy restaurant and with taste for luxury.
This lifestyle has some Henrys feeling cash-strapped and to some extent locked-out of the housing market. It’s also a group that’s sensitive to where they live and while not all are living the high-life, they can be stuck paying high rentals.
These two groups are often entangled in conversations around housing affordability but there are varied, and contrasting points of view often expressed in media reports.
Some recent comments by readers in one major newspaper help to make the point.
“Property is definitely out of reach for most young people if they are looking to immediately purchase a 4-bedroom, 3-bathroom house with a double garage. Why not start with a 1 bedder and build up to your dream home, also in the meantime adjust your lifestyle.”
That might be something for the Henrys to consider.
“Older generations want to guarantee their retirement and financial security; young people want a start. It’s for both of our futures… unfortunately those with money already are going to win out against those who are just starting out.”
This is a quote that I think underlies some of the differences highlighted above but also confirms the Boomer’s quest for financial security.