Even the cheapest local homes are out of reach for at least 40 per cent of young adults even if they have saved a 10 per cent deposit, according to research from the Institute of Fiscal Studies.
Back in 1996, more than 90 per cent of 25 to 34-year-olds would have been able to purchase a house in their area if they saved a 10 per cent deposit and borrowed four-and-a-half times their salary, the research finds.
The IFS says house prices in England have risen by 173 per cent over two decades while the average pay for 25 to 34-year-olds has grown by just 19 per cent over the same period. Largely as a result, the share of 25 to 34-year-olds who own their own home fell from 55 per cent to 35 per cent between 1997 and 2017.
Barriers to homeownership are particularly high in London where – even with a 10 per cent deposit – only one-in-three young adults could borrow enough to purchase one of the cheapest homes in their local area.
Rising property prices relative to incomes have made it increasingly hard for young adults to save a deposit. In 2016, around half of young adults would have needed to save more than six months of their post-tax income to raise a 10 per cent deposit on one of the cheapest properties in their area, compared with just one in 10 in 1996.
IFS research economist Polly Simpson says: “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. 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.”