The greatest current threat to motor manufacturers is that people no longer want to drive. The second biggest threat is that people no longer want to own a car. That’s the message that comes loud and clear from an article in the FT that features the Volvo car stand with no cars on it.
I have to admit a reluctance to get in my car myself, my personal mileage was below 5000 miles last year and I keep my car out of nostalgia and for the personal number plate S4 HEN – which tells me who I’m owned by!
Car’s are not alone – what about houses?
The value of owning a record collection, of philately , of wine cellars – all seem to have dropped. People who I talk to who are under 35 no longer value themselves in terms of what they own. I suspect that we are returning to a different set of values that may be rather less materialistic and (dare I say it) more spiritual.
I suspect that houses are also way down on value. Owning property is certainly not a priority for my son (who was bullied into getting a driving licence but who has never used it – other than as identification).
Is this behaviour a result of pragmatism, or does it continue a trend we are seeing?
If young people fall out of love with home ownership, what will this mean to the value of older people’s housing stock? Will the equity on which so many of us rely for financial security prove illusory?
A house is only worth what someone is prepared to pay for it and as we age, there is a very real chance that ownership rates amongst older people will fall. The lack of income arising from pensions will inevitably place greater reliance on equity release and the lifetime mortgages which pass property from self ownership to the ownership of lenders.
There is only one way for millennials and that is to take control. Historically that has been through securing ownership of cars, houses and possessions.
I don’t see the urge to control today among younger people who are quite happy to stream services and use them on demand.
Instead of owning, millennials are investing heavily in themselves. They are taking jobs that are interesting and rewarding in themselves, not just a means to get a mortgage.
They are buying into training and taking an inordinate interest in their personal finances. Bloggers like Iona Bain – of young money – are the new Martin Lewis’ but they are talking to a new generation more interested in how their money is invested than what to buy with their savings.
I am dubbing this “millennial fightback” as it is their way of dealing with the impossibility of competing with the baby boomers on the baby boomers terms.
A car stand with no cars
The motor industry is first to feel the wave of change. The shift towards car- leasing or in the most extreme – Zip car – is illustrative of a new way of dealing with ownership – that moves from the balance sheet to profit and loss. Kids no longer want a balance sheet weighed down by personal possessions which they see as liabilities as much as assets.
This has profound implications for the savings industry too.
We must recognise it is not the valuation of an asset that is most important to a young person but its utility under ownership.
People are already moving away from conventional measures of worth (the valuation) to a different measure “the value of their money”. If you start valuing your money by what it is doing , then your interest is in the investment itself – what it does – not what other people will pay for it. People are interested in cars as a service , not as objects and property and even savings may follow.
How this plays in pensions
There seem to me to be two competing views of pensions . Those who see pensions as part of wealth are owners. Those who see pensions as a means of doing things, are renters.
We do not of course own ourselves freehold, our lives are on leases which expire when we do. Younger people do not even take for granted ownership of the planet which they see as under existential threat, they may possess a blighted planet when their parents are gone.
This sense of possession rather than ownership could mean a reversion to a view of a pension as something that does something rather than as a balance sheet item.
Currently the “pensions are wealth” brigade dominate the agenda and have pretty well excluded the idea of pension as a utility.
But that is likely to change over generations. The question for pension providers today is how to ride both horses in mid-stream.