Most young adults can’t afford to buy even the cheapest homes

Home ownership in the UK is plummeting, with young adults forced to turn to the private rental market, leaving them unable to save up for a deposit.

New figures released by the Institute of Fiscal Studies (IFS) today back this up.

In 1996 over 90 per cent of 25-34 year olds would have been able to purchase a house with a 10 per cent deposit by borrowing four and a half times their salary.

Average house prices in England have risen 173% since 1997 after adjusting for inflation. But young adults’ real incomes have only risen by 19%.

In that time, homeownership amongst 25- to 34-year-olds has fallen from 55% to 35%.

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— Institute for Fiscal Studies (@TheIFS) October 8, 2018

This has fallen to 60 per cent just 20 years later when applied to the cheapest homes in their area – in London it’s even worse with only one in three able to cobble together the funds.

And that is down to skyrocketing house prices with a 173 per cent increase since 1997. Wages have failed to keep pace – up just 19 per cent over the same period – pricing many out of home ownership and resulting in the proportion of home owners aged 25 to 34 falling from 55 to 35 per cent.

Outlays on deposits account for a higher percentage of wages as a result. Around half of young adults would have to save more than six months of their post-tax income to afford a deposit for one of their area’s cheapest homes compared to just one-in-ten in 1996.

For an average-priced home, that rises to more than 75 per cent of young adults, up from a third two decades ago.

The IFS insist the answer is in building more homes to meet increased demand as well as easing planning restrictions to free up areas to build in green belts and in London and the South East. The research comes ahead of their Green Budget which will be released on October 16.

House prices have risen nine times as fast as wages in the past 20 years. First-time buyers have no chance. We need radical and bold solutions because this is a broken market. Hard work should pay better than sitting on capital. https://t.co/hO5yoygzdI

— David Lammy (@DavidLammy) October 8, 2018

“Big increases in house prices compared to incomes over the last two decades mean that it is increasingly difficult for young adults to get on the housing ladder, even if they do manage to save a 10 per cent deposit,” said Polly Simpson, a research economist at IFS and a co-author of the research.

“Many young adults cannot borrow enough to buy a cheap home in their area, let alone an average-priced one. These trends have increased inequality between older and younger generations, and within the younger generation too.”

The government has long spoken of the need to build more homes to tackle Britain’s housing crisis.

They have pledged to build 300,000 new homes every year by the mid-2020s while Theresa May promised a £2bn fund to build more than 40,000 affordable homes last month following the release of the social housing green paper.