Friday, February 16, 2018

House ownership falls

The chances of a young adult on a middle income owning a home have more than halved in the past two decades. The study shows the growing disparities between rich and poor. Those on middle incomes have seen the largest fall in ownership rates, those in the top income bracket have been least affected.
New research from the Institute for Fiscal Studies shows how an explosion in house prices above income growth has increasingly robbed the younger generation of the ability to buy their own home. For 25- to 34-year-olds earning between £22,200 and £30,600 per year, home ownership fell to just 27% in 2016 from 65% two decades ago.
Middle income young adults born in the late 1980s are now no more likely than those lower down the pay scale to own their own home. Those born in the 1970s were almost as likely as their peers on higher wages to have bought their own home during young adulthood.
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 IFS said young adults from wealthy backgrounds are now significantly more likely than others to own their own home.
Between 2014 and 2017 roughly 30% of 25- to 34-year-olds whose parents were in lower-skilled jobs such as delivery drivers or sales assistants owned their own home, versus 43% for the children of those in higher-skilled jobs such as lawyers and teachers.
Over the past 20 years, average house prices have grown about seven times faster than the average incomes of young adults, according to the IFS study. Average house prices have increased by 152% when taking account of inflation since 1995, though wages for 25- to 34-year-olds have only risen by 22% in real terms over the same period. As a consequence those born in the late 1980s are much less likely to be homeowners in their late 20s than their immediate predecessors. 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.
Owner occupation rates in Britain have been steadily declining since 2003, when the proportion of people owning their home reached its peak of 71%, having risen steadily since the 1980s. Population growth, a lack of new housebuilding, the failure to replace social housing sold under right-to-buy and rising property prices since have resulted in the figure dropping to 63%. Property has become so expensive that the average first-time buyer is now 30 years old and has a salary of £41,000 a year. The IFS said that for nearly 90% of 25- to 34-year-olds, average house prices are more than four times their annual income after tax.

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