The aging of baby boomers It is leading to the release of many properties through inheritance, which may lead to many young people not needing to buy a house, especially as they have fewer siblings.
Ask many millennials – the generation currently in their late 20s to early 40s – about the possibility of buying a home and they’ll probably laugh in your face. THE idea of getting a home loan on their own income alone is often unthinkable, and those who own property generally owe it to an inheritance received early.
As the housing crisis ravages Europe, many members of Generation Z – those born after the year 2000 – may soon find that the situation has reversed. Analyzing real estate financing trends and other data, Economics professor Geoffrey Ditta predicts a gradual change, with this generation abandon long-term commitments with financing.
As inheritances will play a fundamental role in this change. Slower population growth, smaller families and the concentration of real estate ownership among the aging Baby Boomer generation (born between 1946 and 1964) mean that the inheritance rates have increased year after year.
Therefore, Gen Z tends to benefit from the fall in the birth rate in Europe, one of the lowest in the world, with 1.53 children per woman. In simple terms, there will be fewer young people to inherit homes and more homes for them to inherit.
Credit: an increasingly less attractive prospect
Getting credit is scary even in the best of circumstances, as banks require savings, income, stable employment and a sizable down payment. If you meet these criteria, you will, on average, be committed for 25 years.
In a job market characterized by temporary jobs and low wages and stagnant, many people will have difficulty even signing up for a loan, let alone paying it off. The prospect of getting one is especially unattractive at a time when rising interest rates are increasing the cost of living in Europe and other countries. This scenario is already affecting Gen Z’s attitude toward long-term milestones like buying a home.
The fact that fewer credits are being taken out across the continent is therefore not surprising, especially considering the sharp increase in interest rates and the rise in property prices. This decline looks set to continue in the long term, for a number of reasons.
Property ownership in Europe today
In the European Union, the average age at which people purchase their first property is 34 years old. The average duration of a real estate loan is 25 years, which means that the Payments are usually completed at age 59just before retirement age (65 in most EU Member States).
Em 2022, 69.1% of Europeans owned their own homebut only 24.7% had real estate financing. This percentage varies greatly across the continent, with little correlation between property rates and the number of active real estate financings.
In some northern European countries, the number of real estate loans is actually increasing. In the Netherlands, for example, 61% of property owners have a mortgage.
In contrast, this percentage is much lower in countries like Italy, where just 14.6% of homeowners have a home loan. This disparity can be attributed to the more common use of liquid resources or to strongest and oldest heritage traditions of real estate in certain countries.
Spain: an example to follow
We can take Spain as an example of the changes that are already underway. The country has above-average life expectancy and homeownership rates (especially among older generations): the average Spaniard buys your first property at age 41 and receives an inheritance at 51.
The number of inheritances, however, is reaching new heights year after year. From 2021 to 2022, the number of properties inherited in Spain increased by 3.7%, with more than 17,800 properties inherited per month within its borders.
With an average gap of just 10 years between signing up for a home loan and receiving an inheritance, the average Spaniard may see little benefit in tying into a variable and potentially volatile 25-year loan.
Leaving the family home
The continuous increase in property inheritances shows no signs of slowing down and is large enough to potentially decrease the demand for long-term real estate financing. However, the value of inheritances varies greatly between different countries and wealth distributions, making it difficult to make predictions for the whole of Europe.
There is also huge variation in factors such as the age at which young people leave home. Southern Europe generally has higher rates in this regard, with adults typically remaining with their parents until the age of 30.3 in Spain, 30.7 in Greece and 30 in Italy.
In Finland, on the other hand, people typically leave home at age 21.4, with similar low numbers across Scandinavia. In France, adults leave home at 23.4 years old and in Germany at 23.8. According to Eurostat data, many of these average ages showed long-term increases between 2012 and 2022.
However, greater independence among young people does not directly correlate with a greater number of mortgage loans. The impressive 62.54% drop in new real estate credit contracts in Spain, between 2007 and 2023, is reflected in data from across Europe. From 2022 to 2023, Belgium recorded a drop of 33.8%, and between 2021 and 2022 France showed a drop of approximately 47.49%.
Annual data from the European Central Bank, released in November 2023, also shows annual declines of 61% in Slovakia, 57% in Austria, 40% in Luxembourg and 23% in Estonia. Across Europe, the number of new property loans fell by 32% last year.
Impacts on Generation Z
Although they face many other issues, such as obtaining stable employment contracts, housing may not be the main concern for much of Gen Z in the future.
The aging of the baby boomer generation means that large quantities of properties are already being transferred among the richest families: in 2015, inheritances corresponded, on average, to 196,247 dollars per person in the richest 20% of OECD countries. This value had already increased by 50% in less than a decade.
This will benefit Millennials to some extent, but with fewer siblings, many wealthier members of Gen Z may no need to divide inheritances parents, who generally own several properties. This perspective, combined with the conditions for accessing a home loan in an unfavorable job market, raises a simple question for much of Gen Z: Why take on the risk, long-term commitment, and extra cost of a home loan if I don’t need it?
