Generation X overtakes baby boomers in property wealth amid rising generational tensions
One of the worst features of Australian society in recent years has been the conflict between different generations.
Caused by a combination of rapidly falling housing affordability, rapidly rising student debts and a perceived “easy ride” for older generations who emerged with plenty of property and purchasing power after the pandemic, it is easy to see how the economic resentments have grown bigger and become more deeply felt.
Add in the spectre of “the bank of mum and dad” and even the “bank of nan and pop” – features which only happen for a select sample of younger generations – and the seeds of resentment and that thief of joy – comparison – are more obvious than they have been for many decades.
With interest rates remaining high for now and a fairly rapid fall in GDP per capita, these resentments are real and felt directly in the hip pocket.
Arise Generation X
Interestingly, some of the most recent figures show that the generational asset splits are beginning to change and that the long hold that the Baby Boomers have had on the top of the wealth ladder is beginning to wane quite quickly.
Recent figures produced by accountancy firm KPMG show that for the first time, Gen X has overtaken Baby Boomers when it comes to the amount of wealth they have in property.
It is only a tiny difference but the average 51-year old Gen-Xer holds $1.31 million in housing value, just beating the average 69 year-old Boomer who holds $1.30 million.
That compares to $750,000 in property assets for the average Millennial and just $69,000 for the average Gen Z as both cohorts contend with higher prices and punishing interest rates.
The same analysis shows that it won’t be too long before Gen X overtakes the Boomers as the generation with the most wealth overall.
How did Gen X do it?
So how did Generation X move into the overtaking lane and get ready to pass the previously all conquering Baby Boomers?
Well, there are a number of reasons that also hold the potential to help the younger generations as well.
One is that the oldest of the Baby Boomers are beginning to leave their assets to the following generations – either as living bequests or as assets left by a will.
That has helped to bump up the property assets held by Gen X, which are already substantial but carry more debt than those owned by the Baby Boomers.
Another reason is that Gen X’s share market investments – both within superannuation and outside – have been growing quite quickly as markets remain buoyant.
The Baby Boomer generation is also moving to more conservative but slower growing and more liquid investments as they prepare for or continue retirement, which has also helped Gen X to move into the overtaking lane.
These same trends should also start to flow through to the younger generations, although the lack of housing investment could delay the wealth ramp up as well.
Massive wealth transfers on the way
Last year, global real estate consultancy Knight Frank projected that almost US$90 trillion (A$144 trillion) of Baby Boomer wealth will be handed down to Millennials in the US alone over the next 20 years.
That needs to happen given that at the moment Australian Baby Boomers are about a quarter of the population but have 53% of total wealth but as we all know, you can’t take it with you when you go so the wealth transfers between the generations should continue to gradually ramp up.
Gen X doing well with shares as well
When it comes to share portfolios, Gen X have also outperformed the Baby Boomers, with an average portfolio of $256,000.
The average Boomer only holds $206,000 in shares, while Millennials and Gen Z have significantly lower amounts, $51,000 and $7,000 respectively.
Older generations also have more cash and deposits as they move to safer and more liquid investments, with Boomers holding an average $242,000 compared to Gen X’s average of $176,000.
Can super even up the ledger?
The one area in which the younger generations have a better chance to make inroads in the generational inequality is in superannuation due to their long future in the workforce together with much higher mandatory superannuation contributions.
This should lead to much higher super retirement benefits for Millennials and Gen Z even though their current super balances are small.
It should also give them greater exposure to hopefully well managed growth assets like shares, property and private markets.
Together with eventual inheritances or transfers from parents, younger generations might have a much more comfortable retirement, even if they did without such security for longer during their working lives.