Middle-earning young Brits ’locked out’ of home ownership

A report published today by the Institute for Fiscal Studies has revealed that the biggest decline in home ownership in the has been among has been among middle-income 25 to 34-year-olds, with a take-home pay, either as an individual or as a couple, of £22,200 to £30,600.

In 1995-96, 65 per cent of this group owned a home, but just 27 per cent do in 2015-16, with the biggest drop in south-east England.

A third of them are university graduates, while 30 per cent left school at 16. Three-quarters of them live with a partner, and around 60 per cent have children.

The proportion of these middle earners owning a home (27 per cent) has moved closer to the likelihood of those with a low income (8 per cent) than those on a high income (64 per cent).

And today’s young adults are significantly less likely to own a home at a given age than those born only five or ten years earlier. At the age of 27, those born in the late 1980s had a homeownership rate of 25 per cent, compared with 33 per cent for those born five years earlier (in the early 1980s) and 43 per cent for those born ten years earlier (in the late 1970s).

The IFS said the key reason for the decline is the sharp rise in house prices relative to incomes.

Mean house prices were 152 per cent higher in 2015–16 than in 1995–96 after adjusting for inflation.

By contrast, the real net family incomes of those aged 25–34 grew by only 22 per cent over the same twenty years.

As a result, the average (median) ratio between the average house price in the region where a young adult lives and their annual net family income doubled from 4 to 8, with all of the increase occurring by 2007–08.

Andrew Hood, a senior research economist at the IFS, said: “Home ownership among young adults has collapsed over the past 20 years, particularly for those on middle incomes.

“The reason for this is that house prices have risen around seven times faster in real terms than the incomes of young adults over the last two decades.”