The Effect of Inflation on the Economy | Inflation & Property Prices

Britons born in 1980s half as wealthy as predecessors

According to recent figures, Britons born in the 1980s now have half the wealth of those born 10 years earlier. In our latest article, Acumen Financial investigates the reasons why, including the surge of inflation and property prices.

The effect of inflation on the economy

It is no secret that rising inflation rates over the last few years have steadily squeezed standards of living, property prices and even starting wages in the UK. According to the report by the Institute of Fiscal Studies, those born in the early 1980s, have a median net household wealth of £27,000. This figure is half the amount of those born in the 1970s.

Stagnant working age incomes over the past decade have resulted in lower starting wages. Hence why those born in the 1980s are the first post-war age group to earn less than the previous generation.

Inflation and property prices

The IFS report illustrated that those born in the 1980s exhibit a much lower home ownership rate in early adulthood than the post-war age group. IFS economist Andrew Hood said: “Sharp falls in home-ownership rates and in access to generous company pension schemes, alongside historically low interest rates, will make it much harder for today’s young adults to build up wealth in future than it was for previous generations.”

According to housing charity Shelter, average house prices in London have risen by 220%, and 140% across England, between August 1999 and 2014. This surge in property prices has resulted in young people being labelled as ‘Generation Rent’.

The rise of inflation and property prices also affects renters, the IFS Study found. According to the report, their housing costs almost twice those of home owners, swallowing 28% of the income of renters aged 26 to 30.

Inflation-adjusted income

For those aged 25-55, inflation-adjusted income grew by only 2% in the years 2004/05 and 2014/15. These are disappointing figures, according to Hood, considering that earnings growth is a key determinant for future living standards. This is a situation that could be improved through long-term Government investment.

Presently, the study illustrates how younger people will also struggle to save enough for retirement. Unlike their predecessors, those born in the 1980s are likely to face great uncertainty in terms of future living standards.

For more information on inflation and property prices, or for advice on purchasing a home or saving for a pension, please call one of our financial advisors today on 0151 520 4353. Alternatively, email

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