Rich Baby Boomers who hog the UK’s housing wealth pose a bigger threat to the economy long term than Trump’s war in Iran – but don’t blame them, blame the politicians.
The over-60s own more than half of Britain’s housing wealth, with property worth nearly £4 trillion, according to estate agents Savills. And unlike younger homebuyers, most don’t even have to worry about Donald Trump’s war on Iran driving up interest rates, as they paid off their mortgage years ago.
Boomers (born between 1946 and 1964) are in possession of 55 per cent of the UK’s entire housing capital. Younger generations can only look on in envy and dismay.
This inequality between young and old, and the failure to address it, poses a far greater danger to our prosperity over the long term than the war in the Middle East currently causing havoc for energy markets and ravaging our pension plans.
Property is the most visible and emotive symbol of an increasingly stark generational divide. The type of home we can afford defines our lives. It matters a great deal if 30-somethings feel unable to marry and have children because they can’t scrape together enough for a poky flat, let alone a family house.
But housing is just one aspect of the widening financial chasm. And if not addressed by politicians, we’ll be in deep trouble.
This isn’t about individual Boomers being selfish, but a deeper structural feature of the UK economy – and it’s one of the least-discussed threats to our future affluence.
We are living longer, which is good news, but the costs to society are spiralling. Politicians are reluctant to confront this, probably for fear of offending older voters.
Japan shows us what can happen when wealth is disproportionately concentrated in the hands of the old, writes Ruth Sunderland
In the UK, the over-60s own more than half of Britain’s housing wealth, with property worth nearly £4 trillion
Yet spending on older generations, including pensions, health and care, could push UK debt towards 270 per cent of national income in the next 50 years. Who will be paying? Our children and grandchildren, that’s who.
We can look to Japan, where the population is ageing more rapidly than any other country in the world, to see what can happen when wealth is disproportionately concentrated in the hands of the old.
Japanese households have nearly £11tn of assets, more than half of which belongs to the over-65s. Some £1.5tn is owned by those suffering cognitive decline. Much of this money is dormant capital instead of being invested in projects that would help the Japanese economy to grow. The same could well happen here.
Being deep into middle age myself, I should emphasise that older people are not to blame. I have no truck with the Boomer-bashing popular on social media. It is far more complex.
One factor was the money-printing by central banks, including the Bank of England, after the 2008 financial crisis. This helped push down interest rates to rock bottom levels, which in turn encouraged people to invest in assets such as houses and shares, driving prices up. Those who benefited most tended to be the mature and the well-off.
As for houses, a persistent shortage of supply has driven up prices, which is not the fault of Boomers. Far from being selfish, most 60-plus parents I know bend over backwards to help their children and grandchildren.
In any case, not all are squatting on vast property riches. My mum’s house on Teesside certainly hasn’t soared in value as it would have in the south-east.
Former John Lewis boss Sir Charlie Mayfield found youngsters who were not in education, employment or training face a lifetime loss of more than £1million in earnings and pensions
That said, inequality between generations is real. Savills found those in their 40s have only around 12 per cent of the UK’s total property wealth.
Around one in five Millennials and Gen Zs have no savings at all. If they do get on the property ladder, two thirds of them are forced to take out a marathon mortgage lasting 30 years or more.
Some Boomers also enjoy gold-plated pensions that have become virtually extinct for younger workers in the private sector – though talking about pensions assumes young people can get a job at all.
The former John Lewis boss Sir Charlie Mayfield, who led a recent review into helping people into work, found youngsters who were NEET (not in education, employment or training) face a potential loss of more than £1m in earnings and pensions over their lifetimes.
There are things the Government could do if it chose.
Rachel Reeves could reverse her decision to make pensions subject to inheritance tax so Boomers could pass on more wealth tax-free to younger generations.
The Chancellor could also speed up reforms to pension funds so more of the money accumulated by well-off oldies can be put to work in ways that help the UK economy to thrive. At present, too much of our pension pots is invested overseas, funding growth abroad rather than at home.
The rules need to change to encourage pension fund managers to put more of that cash into the UK, including start-ups by young entrepreneurs that will create wealth.
Reeves should also reduce the cost of employing a young person, which has soared due to hikes to the minimum wage and National Insurance. She should bring in a Skills Tax Incentive, giving reliefs to employers taking on apprentices.
Boomers are often vilified for clogging the housing pipeline by staying in large properties they no longer need. Downsizing, however, is expensive and there’s a shortage of suitable properties. So let’s build more bungalows – and scrap stamp duty, ideally for everyone, but certainly for last-time buyers.
Young people have good reason to feel they’re getting a raw deal, but the solutions lie with politicians, not blaming Boomers.
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