Recession Creates “Kidults”

The subprime meltdown burst the housing bubble and the global recession has put the brakes on housing prices. This still doesn’t mean that housing is more affordable. This is evident in the United Kingdom where the number of adult children living rent-free with their parents–dubbed “kidults”–has increased from 500,000 last year to 1.6 million this year.

According to London’s Daily Telegraph (8 April 2009),

“While an adult living at home until their 30s is more associated with our continental cousins, the research shows that this is a trend that is on the increase here in the UK as well.”

It means there’s now more than 1.9million Kidults in the UK and with average rents of £441.78 per month, these individuals are saving £839 million.

The research found that areas where house prices are traditionally the most expensive are where more people are unable to afford to buy themselves.

More than 270,000 adults in London alone currently live rent-free and those living in the South of the country are twice as likely to live with others rent-free compared to those living in the North East and North West of the country.

The idea that the recession might cure housing price inflation is misguided. Prices reflect demand and supply. Demand is driven in large part by income (and demographics). Strong economies drive up the demand for housing.

At the end of the day, high housing prices most often reflect supply constraints. Until supply increases to meet demand, these booms, busts, and bubbles are inevitable.