'Collapse' in home-ownership among young adults on middle incomes, study finds

'Collapse' in home-ownership among young adults on middle incomes, study finds

For almost 90 per cent of 25 to 34-year-olds, average house prices in their region are more than four times their annual after-tax household income and for almost 40 per cent house prices are more than 10 times their income.

The falls in homeownership have been sharpest for young adults with middle incomes. Those born in the 1970s were nearly as likely as their peers on higher wages to have bought their own home during young adulthood.

An IFS statement says: "This increase in house prices relative to family incomes fully explains the fall in homeownership for young adults".

Just 27 per cent of middle-income adults aged between 25 and 34 owned a home in 2016, down from 65 per cent among the same age group in the mid-Nineties, the Institute for Fiscal Studies has found.

"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".

The myth fewer millennials own homes than previous generations because they prefer a nomadic lifestyle has been quashed by new research, which has suggested young people on middle incomes are less than half as likely to own their own home than previous generations at the same age.

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 advantaged backgrounds are significantly more likely to own their own home, the IFS said.

The government abolished stamp duty for the majority of first-time buyers but was widely criticised after the independent Office for Budget Responsibility warned it would push up house prices, benefiting those who already owned homes.

IFS senior research fellow Andrew Hood said: "For those on middle incomes, their chances of owning their own home have fallen from 2 in 3 in the mid-1990s to just 1 in 4 today".

The IFS study also comes as UK Finance figures showed that first-time buyer (FTB) numbers past year reached the highest number since 2006, with 365,000 people getting on to the property ladder. Young peoples' incomes are now much lower relative to average house prices.

But Labour's Shadow Housing Secretary John Healey blasted the Government's response.

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

She said: "The dramatic shift in the housing market for first time buyers is brought to light with a shocking 38% drop over a 20 year period".