Millennials are a record-breaking generation
Millennials have just usurped baby boomers to become the UK’s largest living generation, with a population of 14.26 million people aged between 26-41 years old. Successive Generation Z (zoomers) already make up around 19% of the UK’s population and 27% in the US. They’re the most racially and ethnically diverse generation to date, and have just entered the workforce – the eldest being 22-years-old now.
As the oldest millennials enter their forties this year, their record size make them the largest workforce cohort we’ve seen yet, and therefore a huge commercial audience. Right now, Generation Z account for 20% of the entire UK workforce and are estimated to outnumber all other generations across the globe.
Both generations hold notably different buying preferences to those preceding them, with values shaped by technological breakthroughs, societal change and a worldwide ecological crisis.
Wealth, the inheritance economy and the future of home ownership
While it’s true that millennials earn higher salaries than their predecessors, the cost of living has risen sharply enough to mean they are, in real terms, less wealthy. Modern interventions, namely student debt and two recessions, have hollowed their would-have-been plump pockets. However, the eldest are now moving into senior roles at work and a lucky few are set to gain from the biggest inheritance waterfall in history.
Presently over 70% of UK household wealth is held by the over-50s, driven by an exponential 273% rise in property prices between 1996 and 2016. Over the coming 20-30 years, a record £5.5 trillion is expected to pass from baby boomers to younger people in the ‘Great Wealth Transfer.’ This cascade of capital is set to peak in 2035, with around £327 billion in assets and funds being passed to around 300,000 people over the next decade. As there were just over 14 million millennials in the UK in 2020, not everyone will benefit from such a fortunate windfall.
The elusive mortgage
Fewer millennials hold a mortgage compared to previous generations: twenty years ago, two-thirds of people in their mid-forties had a mortgage; by 2017 the figure had dropped to half. Until salaries take a sharp turn upwards, house prices drop steeply, or a large inheritance appears, young Londoners for instance, will struggle to afford a home that’s almost 12 times their salary.
The renting surge
Renting among these groups is big business. By 2018, one in five people were renting privately in the UK – that’s 20% of the population and an increase of over 100% since 2000 – and this rises to 29% of all people in London.
Many millennials now actively chose to rent to delay the financial burden of home ownership, particularly now post-pandemic hybrid working models are common.
Back in 2019, these younger generations covered three-quarters of the entire rent paid across the country with millennials paying 60% and Generation Z covering the remaining 15%.
Values, tech and the environment
Both generations have grown up alongside two major differentiators of the modern world: the internet and the climate crisis. The internet has given these groups huge amplification channels for their views and values – which they have in spades – while the climate crisis is often a driver for conscientious social media broadcasting.
Studies and surveys have found that younger people care deeply about sustainability, health, the future of the planet and both personal and corporate responsibility. Their strong values and innate feeling of obligation, make these generations keen to support businesses with transparent sustainability goals.
Buying choices: experiences and wellness over possessions
Not only are Generation Z saving for their future, they are also more likely to spend a premium on wellbeing and health products. In an age of high-anxiety, they consciously look after their mental health too. Happiness, health and wellbeing apps, activities and products are attractive to both generations; and as advocates of mental and physical wellbeing they’re willing to pay to feel good. They embrace experiences over material objects, with studies finding that 78% of millennials would rather spend on an experience than a luxury product.
Experience spending on holidays, eating out and enjoyable pastimes has seen remarkable growth, actively overtaking retail spending across these age groups according to Experian. Other notable changes in habit include spending more on self-development for work, and a switch to self-employment to support freer lifestyles – both trends are associated with their pursuit of happiness.
As advocates of mental and physical wellbeing, millennials and Generation Z are willing to pay more to feel better. Realising that happiness isn’t found in materialistic items, millennials in particular have made their peace with long-term renting – even finding solace in the decision.
Over half of millennials will only buy products that align with their own values, with 63% reported to spend more on sustainable products. Interestingly, this trend is being pushed from home as 72% of millennial parents claim loyalty to ethical brands.
US studies show that millennials and Gen-Z spend around $158 billion on wellness and fitness. A rise in mental health understanding, neurodiversity acceptance, and a rise in fitness and nutrition awareness (gut health being a perfect example), has created a set of highly informed wellness consumers.
As they reject ownership of things, commonplace subscription services gives these generations access to entertainment services (Netflix and Spotify), and luxury goods – as seen in the rise of car sharing schemes. This has led to what is commonly called the sharing economy.
“25 years from now, car sharing will be the norm, and car ownership an anomaly.“
– Jeremy Rifkin, Economic and Social Theorist, 2017
A rental surge and hike in buying prices
The new year caused a race for space across UK towns and cities, with 76% more people searching for a rental property than during the same period between 2018 and 2021. A lack of supply meant there were 39% less properties on the market in January 2022 compared with the previous January. London rent prices fell during the pandemic, but demand pushed prices up again.
The pandemic has brought its own property problem: a sharp rise in selling prices. A US study by RentCafe found that the number of higher-earning millennials taking up tenancies was on the rise. Despite earning at least $50,000, almost 40% were priced out of the market last year.
In the UK, 50% of baby boomers owned a property by the time they reached 30 years old, but house prices have risen twice as fast as wages over the past 40 years. This translates to mean house prices are 14 times higher than they were in the late 1970s, or eight times an average salary. In fact, March 2022 saw record house price growth across the UK, with the average price now a fifth higher than at the start of the pandemic. With an 11% drop in millennial home ownership over the last five years, property ownership is shifting:
“The housing market used to spread wealth, but is now a powerful engine for inequality, with many households unable to access homeownership and with higher prices also triggering higher rents.“
– UK Housing Review, 2022
So, where do they want to live?
Since the early 2000s, we’ve seen trends for fitness, nutrition and mental health grow heartily alongside a conscious need to protect the natural world and our planet. In total, the wellness industry is valued at $4.4 trillion worldwide, and avidly consumed by its main audiences, millennials and Generation Z.
Between 2014 and 2019, the number of vegans in the UK quadrupled, and over the past ten years, the number of gyms and fitness centres has more than doubled. Mindfulness and meditation have become hugely popular with the digital app Headspace having been downloaded over 65 million times and amassing over two million paid subscribers. Air pollution has now become a huge concern, as a global audience recognises the need to address the burning of fossil fuels, and clean up our air. Indoor air quality has been exposed as a real threat to our health and many landlords are addressing air quality in new developments, to attract this new wave of hyper-informed occupants.
Additionally, results from our survey showed UK consumers were 71% more likely to spend more in rent (or house prices) on somewhere that could confirm it had good air quality, confirming that air quality is now perceived as a vital indicator of a building’s health.
Health and wellbeing
If millennials and Generation Z are to live somewhere, they want spaces that centre around wellness and sustainability. Interestingly, the healthy building movement is in full swing, where care is taken to address the building’s impact on the environment, the local community and the building’s users. This isn’t just about physical elements and comfort either; the healthiest buildings address the emotional health of the people within it too.
Now, more than ever, is the time to design wellbeing into the heart of new buildings, refurbishments and retrofits, so that buildings of the future deliver complete health for their users and for the planet.