Wealth of people in their 30s has 'halved in a decade'

[bomberbrown]

Saw this on the BBC news this morning. 

http://www.bbc.co.uk/news/business-37508968

Ironically, my sister and I fall into these two profiles (all be it I was born late 60's) and I rent and she has a mortgage/owns house. 

[Mikhail Liebenstein]

Posting here as we started the same topic in 1 minute of each other.  Mods delete the thread "This Generation Poorer than That Generations"

 

So we have another clutch of "Born in the decade X, you'll be poorer than your parents"

Today the Guardian and a few others are reporting that children born in the 1980s will apparently be only half as rich (net assets) compared with those born in the 1970s.

https://www.theguardian.com/business/2016/sep/30/born-in-early-80s-then-youre-half-as-wealthy-as-1970s-children-says-ifs

But interestingly there has been a long run of these stories:

The Daily Mail from 2013, even goes as far as saying those born in the 1960s/70s won't be as well off as those of the 1950s

http://www.dailymail.co.uk/news/article-2524937/Children-60s-70s-retire-POORER-parents.html

So what is going on?

• Globalisation
• End of defined benefit schemes
• No inflating away of large mortgage/student debt
• Very low interest rates
• Over inflated house prices and lack of new housing
• Bottom line driven approach to business and no wage rises

A lot of the above is fixable.  Government and governments needs to get even tougher on bad corporate behaviour and dubious tax schemes without doubt, but that seems to be a bit of a distraction to some of the more fundamental issues.  Certainly in the UK, I do think the biggest issue here is debt accumulation and build up, mainly due to ever inflating house prices, this imposes a tax on the real economy. The only way round this is to i) build more houses and ii) reduce the financialisation of the economy - this last point is apt, as we don't really have one economy, we have 2. The real economy which has been starved of money/credit for years (ie as the US call it Main Street) and the financial economy which essentially consists and consisted of banker style assets such as CDOs, MDS, CDS, Hedge Funds etc  - all the liquidity created has basically had to go though the filter of the financial economy before it can get to the real economy.  The problem is the filter has basically been blocked and there is no trickle down.  My view is that the Government should start to cut back what it puts into the financial economy and take the hit on things like London house prices and all the other financial assets that have been propped up for so long, and instead do some QE for the real economy - ie construction, new automation system for public services to reduce the size of the civil service, some public house building and tax cuts for taxpayer.

Not trying to sound Corbyn like as I am a free marketeer, but I think right now we don't have a free market.

 

Edited September 30, 2016 by Mikhail Liebenstein

[bomberbrown]

I like your post better Mikhail. 

[Mikhail Liebenstein]

2 minutes ago, bomberbrown said:

I like your post better Mikhail. 

I liked your title better.

[Dorkins]

Quote

In their early 30s, people born in the early 1980s have average (median) net household wealth of £27,000 per adult – including housing, financial and private pension wealth. This is about half the median wealth that those born in the 1970s had at around the same age (£53,000).

This is among the main findings of new IFS research published today, which for the first time looks at both the overall household wealth and total income of different generations.

It looks like those born in the early 1980s are likely to find it harder than their predecessors to build up wealth in housing and pensions as they age. They have much lower home-ownership rates in early adulthood than any other post-war cohort, and – outside the public sector – have much less access to generous Defined Benefit pension schemes than previous generations did at the same age.

Other findings include: 

• Those born in the early 1980s were the first post-war cohort not to enjoy higher incomes in early adulthood than those born in the previous decade.This is partly the result of the overall stagnation of working-age incomes, but it also reflects the fact that the Great Recession hit the pay and employment of young adults the hardest.
• Those born in the early 1980s have much lower home-ownership rates in early adulthood than any generation for half a century. At the age of 30, only 40% of those born in the early 1980s were owner-occupiers, compared to at least 55% of the 1940s, 1950s, 1960s and 1970s cohorts.
• In their late 20s, renters born in the early 1980s spent nearly 30% of their net income on housing costs (largely rents) on average, compared to 15% for homeowners (largely mortgage interest). At the same age, renters and homeowners born in the 1960s both spent around 20% of their income on housing costs on average. Hence, the decline in homeownership has been accompanied by a divergence in the costs paid by renters and homeowners
• Outside of the public sector, those born since 1970 have much less access to generous Defined Benefit (DB) pensions than previous generations did.In their early 30s, less than 10% of private-sector employees born in the early 1980s were active members of a DB scheme, compared to more than 15% of those born in the 1970s and nearly 40% of those born in the 1960s. The recent introduction of ‘auto-enrolment’ means that younger cohorts have higher overall pension membership than their predecessors did but at much lower levels of generosity.  

Andrew Hood, an author of the report and a Research Economist at IFS said: “By the time they hit their early 30s, those born in the early 1980s had about half as much wealth as those born in the 1970s did at the same age. Sharp falls in home-ownership rates and in access to generous company pension schemes, alongside historically low interest rates, will make it much harder for today’s young adults to build up wealth in future than it was for previous generations.”

https://www.ifs.org.uk/publications/8593

[spyguy]

Gordon Browns fault again.

Robbed the young blind to try and get the eldery and rich to vote for him.

 

[Amiinsane]

Shows how shortsighted government strategy is. They're only ever concerned with winning the next election and staying in power. 

The county is storing up massive problems in future. An entire generation handing over a huge proportion of their earnings just to get shelter. Little chance to save for the future or invest in a pension. And yet no government will tackle rent levels. 

Guess they're not bothered about having millions of people with no way to support themselves in old age. Still, as the old are those whose votes they care about, reckon it will be ok. 

[crashmonitor]

Probably because  those born in the eighties have not really had any significant chance of asset valuation increases.Someone born in the seventies would have perhaps bought a house around 1996 when the Halifax price index was at 200 and a decade later the index stood at 630. Over the last decade it is unchanged in the north and up about 25% in the south or about 700 on the uk wide index. Similar story with equities gone nowhere barring dividends.

 

So the only chance for unearned gains was to time your house buy in the 2009-2012 dip or shares during a crash phase. Previously timing didn't really make any difference especially as house prices tripled every decade from 1964-2004 and equities exploded between 1974-1999.

Rather makes the previous generation feel they were clever when actually chiimps could have managed it with the explosive asset growth from 1974-2004 (equities excepted 1999-2004)

Edited September 30, 2016 by crashmonitor

[Mikhail Liebenstein]

Interesting the BBC takes a strange angle on why those born in the 1980s are poorer than those born in the 1970s:

Quote

Today's 30-something generation has missed out on house price increases and better pensions, according to research by the Institute for Fiscal Studies.

So I take the point on pensions, but I think there may be an error in the rest of the sentence.  Yes, I suppose had they bought in 2014 aged 30 and had prices had risen 40% since they might be sitting on a tidy pile of virtual equity, but "missing out of house prices increases" really is a BBC proxy phrase for missing out on the ability to buy a house in the first place.

Edited September 30, 2016 by Mikhail Liebenstein

[Motor_Blade]

3 minutes ago, Amiinsane said:

Shows how shortsighted government strategy is. They're only ever concerned with winning the next election and staying in power. 

The county is storing up massive problems in future. An entire generation handing over a huge proportion of their earnings just to get shelter. Little chance to save for the future or invest in a pension. And yet no government will tackle rent levels. 

Guess they're not bothered about having millions of people with no way to support themselves in old age. Still, as the old are those whose votes they care about, reckon it will be ok. 

 

Spot on here, that's a massive part of the problem - politicians doing what they think will be popular to get/keep them in power rather than what would actually be of real benefit. 

That said, even if that wasn't the case there'd still be problems caused by globalization - that is inevitably going to push wages down for many and lower living standards regardless of political failings here. 

[canbuywontbuy]

19 minutes ago, bomberbrown said:

I like your post better Mikhail. 

 

16 minutes ago, Mikhail Liebenstein said:

I liked your title better.

Guys....guys....get a room!

[TheCountOfNowhere]

2 minutes ago, canbuywontbuy said:

 

Guys....guys....get a room from a HMO BTLer I/O over levered scumbag landlord !

You young boys are not on the HPC ball at all.

Edited September 30, 2016 by TheCountOfNowhere

[canbuywontbuy]

It will come down to how much the economy will crash, and how much house prices will fall.  If house prices fall 20% or so, and that is considered a "crash", then I just see future generations as pseudo-slaves working all day for shelter and the necessities and little else.

[crashmonitor]

Ah i see there are two threads running. The point I made on the other thread was that you had to be exposed to Tony Blair's house price tripling between 1996-2006 (200 to 630 on the Halifax measure) or the previous centuries equity advance FTSE 100..... 1000- 6930 between 1984-1999. Such easy money a chimp could have achieved mega net asset gains. Born 1980s, born too late....the Brown boom was for boomers and generation x only...Labour politicains self enrichment. Generation Y got the consolation prize education, education, education. Net liabilities, net liabilities, net liabilities.

Edited September 30, 2016 by crashmonitor

[RentingForever]

Quite a few Gen X'ers like me missed out too. If you had an early career of short-term contracts and relocations while you established yourself then you could easily have missed the magic window for final salary pensions (most jobs back then required you to be there for 1-2 years before you could join their pension scheme) and for house price inflation (why buy when your next job could be the other end of the country? There was no just-rent-it-out-innit culture then).

But then, how much of this extra wealth is real? Will those final salary pensions actually be paid out, or are they so crippling to companies that some deal will be done with government in the next twenty years to cut them right back? Will house prices remain historically over-inflated over the next twenty years to preserve your equity, or will you lose a big chunk in the next crash (and what use is that equity anyway if it's in the place you need to live in)?

[Errol]

47 minutes ago, spyguy said:

Gordon Browns fault again.

Robbed the young blind to try and get the eldery and rich to vote for him.

 

Don't get me wrong, I despise Brown, but I don't think he is the main culprit.

Nixon is, if anyone, the main man at fault. The closure of the gold window is where most of the problems started. Check out all the charts which neatly start to take off in the early 70s.

Edited September 30, 2016 by Errol

[Crumbless]

48 minutes ago, spyguy said:

Gordon Browns fault again.

Robbed the young blind to try and get the eldery and rich to vote for him.

 

Nah the Tory party have had over 6 years and they've just made things worse.

Brown/Blair were the inspiration for the last 2 neoliberals, if a vaguely pro free market Tory party had won the election in 2010 and let the markets correct the youngens would have their house and the rest who have profited from HPI would not have done so.

Past time for blaming the last govt.

[Crumbless]

30 minutes ago, crashmonitor said:

Ah i see there are two threads running. The point I made on the other thread was that you had to be exposed to Tony Blair's house price tripling between 1996-2006 (200 to 630 on the Halifax measure) or the previous centuries equity advance FTSE 100..... 1000- 6930 between 1984-1999. Such easy money a chimp could have achieved mega net asset gains. Born 1980s, born too late....the Brown boom was for boomers and generation x only...Labour politicains self enrichment. Generation Y got the consolation prize education, education, education. Net liabilities, net liabilities, net liabilities.

I was born in 1975 and most those i know who didn't buy by 2002/3 are still priced out and renting, the HPI around this time was insane i like many i know waited for the inevitable crash ... we still are. Those born a few years before my age do seem to have been just the right age to have bought by then.

 

[iamnumerate]

1 hour ago, spyguy said:

Gordon Browns fault again.

Robbed the young blind to try and get the eldery and rich to vote for him.

 

I would saying "working young" and add lazy to that.

[iamnumerate]

10 minutes ago, Crumbless said:

I was born in 1975 and most those i know who didn't buy by 2002/3 are still priced out and renting, the HPI around this time was insane i like many i know waited for the inevitable crash ... we still are. Those born a few years before my age do seem to have been just the right age to have bought by then.

 

I agree although a few lucky people born in 75 got on just on time.  Even people who hadn't bought by 2001 in London were partially affected.

[mattyboy1973]

59 minutes ago, Mikhail Liebenstein said:

Interesting the BBC takes a strange angle on why those born in the 1980s are poorer than those born in the 1970s:

So I take the point on pensions, but I think there may be an error in the rest of the sentence.  Yes, I suppose had they bought in 2014 aged 30 and had prices had risen 40% since they might be sitting on a tidy pile of virtual equity, but "missing out of house prices increases" really is a BBC proxy phrase for missing out on the ability to buy a house in the first place.

Not only did they "miss out" on price increases, they are actually paying for these increased prices through their rents. The media always seem to have this idea that house price increases are free money for the lucky few - they rarely seem to make the connection that somebody else actually has to pay for it. In this case it is a double whammy of higher rents/no equity for the young, and "free money" for the old which increases this difference from both sides.

[Mikhail Liebenstein]

5 minutes ago, RentingForever said:

Quite a few Gen X'ers like me missed out too. If you had an early career of short-term contracts and relocations while you established yourself then you could easily have missed the magic window for final salary pensions (most jobs back then required you to be there for 1-2 years before you could join their pension scheme) and for house price inflation (why buy when your next job could be the other end of the country? There was no just-rent-it-out-innit culture then).

But then, how much of this extra wealth is real? Will those final salary pensions actually be paid out, or are they so crippling to companies that some deal will be done with government in the next twenty years to cut them right back? Will house prices remain historically over-inflated over the next twenty years to preserve your equity, or will you lose a big chunk in the next crash (and what use is that equity anyway if it's in the place you need to live in)?

Loads of Gen X missed out, as I can testify from many of my school friends. Whilst I myself didn't miss out , it was only because I was able to land a well paid corporate job owing to being a bit of a swat at school, and then going onto  top university to read engineering.

But 98% of my fellow state comprehensive fellow pupils won't have had that opportunity, largely being stuck in jobs paying between £12k and £24k for most of their lives.

What I do find interesting is that a lot of big firms and well paid jobs do seem to be occupied by rather thick privately educated people. I do think there is still a bit of a class structure at play in the UK and actually since my time this has got worse.  At least when I was at University there were grants and it was pre the Blair boom - so people with less financial backing could still afford to work in London and get up the ladder - also the opportunities outside of London have dwindled since that time. So it just gets harder for each generation.

 

[Dorkins]

Apparently the theme of the Conservative party conference will be 'a country that works for everyone'. I'm looking forward to all the speeches calling for an 80% HPC in London/SE so the younger generation can buy in at a reasonable price.

[Crumbless]

13 minutes ago, iamnumerate said:

I agree although a few lucky people born in 75 got on just on time.  Even people who hadn't bought by 2001 in London were partially affected.

Ironically i bought a 1 bed flat for 40K, done it up and flogged it as the leasehold meant i couldn't rent whilst i went travelling around the world, this was in 2000.

Upon my return and waiting a year, prices of such flats had doubled.

Teach me to have fun!

edit - same flats now are going for £150K, wages for the job i was doing at the time are about 30% higher.

Edited September 30, 2016 by Crumbless

[Dorkins]

Mods, please merge into "Wealth of people in their 30s has 'halved in a decade'"