How will millennials spend US$90 trillion?
Over the next decade or so, a massive transfer of wealth and assets will occur as the silent generation and baby boomers hand over the reins to millennials. The shift will see US$90 trillion of assets move between generations in the US alone, making affluent millennials the richest generation in history.
The transfer is happening amid seismic changes in how wealth is put to use. The difference in outlook between younger and older generations will result in a substantial reappraisal of marketing strategies for anyone wanting to sell products or services to this newly wealthy group.
We'll take a deep dive into how this will impact investing when we launch our annual Wealth Report on March 6th. For now, we've shared a few snippets with the media, notably the Times here and Bloomberg here. You can also catch my appearance on CNBC earlier this afternoon here.
The generational differences in investing strategies will vary, but climate change is just one example through which capital will be redirected. Looking solely at the top line question on carbon emissions from our main Attitudes Survey of wealthy individuals and their advisors, millennials appear to have got the message when it comes to cutting consumption – 80% of male and 79% of female respondents say they are trying to shrink their carbon footprints. Male boomers take a different view, with just 59% trying to reduce their impact, well below their female peers (67%).
You can sign up for the launch of The Wealth Report here.
Land banking
The idea that housebuilders hoard land with little intention of building homes while they wait for asset values to appreciate is alluring to government officials, and I can understand why.
Solving one of our most complex economic problems by dishing out a few fines would be ideal, which is why ministers will keep commissioning the same review while they wait for a different answer.
The Competition and Markets Authority on Monday published the initial findings of its housebuilding market study. The study was initiated after Michael Gove wrote to the CMA expressing concerns as to whether homebuilders were "delivering the homes people need at sufficient scale or speed," the CMA said at the time.
The researchers have now found that: "the number of houses being built and their affordability are propelled by two key drivers: the nature and operation of the planning system and the limited amount of housing being built outside the speculative approach (such as affordable housing, self-build, and build-to-rent)." The findings read a lot like the last review, conducted by Sir Oliver Letwin in 2018.
You can read more from Knight Frank’s own Anna Ward here.
Tax cuts
The Wealth Report isn't the only important publication out next Wednesday. The government will deliver its spring budget, which will likely form the foundation of the Conservative's election campaign.
The timing will heap pressure on the Chancellor to announce sweeping tax cuts, but the government is haunted by the mini-budget. Investors including Blackrock's UK chief investment strategist Vivek Paul have warned that the so-called 'bond vigilantes' that brought down Liz Truss stand ready to punish politicians that overreach.
As noted by Antonia Haralambous in yesterday's Leading Indicators, tax revenue exceeded spending by £16.7 billion in January, more than double to surplus compared to the same period a year earlier. Meanwhile the budget deficit is running about £9.2bn below the OBR forecasts. Nevertheless, the Institute for Fiscal Studies yesterday painted a pretty bleak picture for the public finances and outlined why announcing tax cuts without setting out exactly where spending cuts will be made to pay for them is a bad idea.
The IFS suggests that tax cuts without tax reform would be another missed opportunity: "if the Chancellor is determined to cut taxes and wants to boost growth then better options exist than simply cutting the rates of income tax, National Insurance contributions or inheritance tax. Stamp duties on purchases of properties and shares are particularly damaging taxes and should be towards the front of the queue for growth-friendly tax cuts."
Stamp duty
Hong Kong is scrapping all stamp duties in an effort to revive the housing market, the city's finance secretary announced a few hours ago.
“After prudent consideration of the overall current situation, we decide to cancel all demand side management measures for residential properties with immediate effect, that is, no Special Stamp Duty, Buyer’s Stamp Duty, or New Residential Stamp Duty needs to be paid for any residential property transactions starting from today,” Mr. Chan said, according to a Hong Kong Free Press translation. “We consider that the relevant measures are no longer necessary amidst the current economic and market conditions."
House prices in Hong Kong hit their lowest level in seven years this month, according to our latest research, published this week. Values are down almost 7% over the course of the year.
Transaction volumes are recovering - January saw an almost 20% increase month-on-month. Meanwhile, rents have climbed almost 7% in the most recent twelve months, supported by an influx of overseas and mainland talent attracted by the Government’s various talent schemes - we'll also be taking an in-depth look at those in The Wealth Report next week.
