IFS damns young adults' homeownership chances

IFS damns young adults' homeownership chances

IFS damns young adults' homeownership chances

Some 27% of middle income 25 to 34 year olds owned a home in 2015/2016 compared to 8% of those with low incomes and 64% of those with high incomes.

Two decades ago, less than half of young adults lived in a region where house prices were more than four times average income. While those on middle incomes have seen the largest fall in ownership rates, those in the top income bracket have been least affected.

It means that the home ownership rate of middle income young adults is now closer to those with low incomes than those with high incomes.

Average house prices were 152 per cent higher in 2015/16 than they were in the mid-90s, after adjusting for inflation, the report revealed - while incomes only rose 22 per cent in that time.

The biggest decline in home ownership in the last 20 years has been among middle-income 25 to 34-year-olds, the Institute for Fiscal Studies said.

This significant rise in house prices compared to incomes explains why so many young people now struggle to get on the housing ladder, says the IFS.

It found that those born in the late 1980s were much less likely to be homeowners in their late twenties than their immediate predecessors.

The average (mean) United Kingdom house price was 152% higher (2 ½ times as high) in 2015-16 than in 1995-96 after adjusting for inflation, but the average (mean) after-tax family income of 25 to 34 year olds grew by only 22% in real terms over those 20 years. About a quarter of those born towards the end of Margaret Thatcher's government owned their own home at the age of 27 compared with a third born at the start of the decade and 43% of those born in the late 1970s.

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The average cost of a home across the country was £227,000 in December, which is £12,000 more than at the same point a year earlier.

- Young adults from more disadvantaged backgrounds are less likely to own their home, even after controlling for the kind of job they have and other characteristics.

Local newspapers accused the explosion in house prices of having "robbed" the younger generation of the ability to buy their homes.

Andrew Hood, senior research economist at the IFS and an author of the report, said house price rises outstripping wage growth had caused the dramatic decline in homeownership.

Many first-time buyers are priced out of areas like London, where the average cost of a home has soared to £484,000.

"These squeezed millennials have seen the average house price rise seven times faster than their income".

The IFS study also comes as UK Finance figures showed that first-time buyer (FTB) numbers a year ago reached the highest number since 2006, with 365,000 people getting on to the property ladder.

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