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Cheapest local homes are out of reach for 40% of young adults

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08/10/2018
At least 40% of young adults would not be able to buy the cheapest homes in their local area, according to research.

In 1996, over 90% of 25- to 34-year-olds would have been able to purchase a house in their area if they borrowed four-and-a-half times their salary, as long as they had a 10% deposit.

By 2016, that proportion had fallen substantially. Even with a 10% deposit, only around 60% of young adults would have been able to borrow enough to buy even one of the cheapest homes in their area, researchers from the Institute for Fiscal Studies found.

Barriers to homeownership are particularly high in London where – even with a 10% deposit – only one-in-three young adults could borrow enough to purchase one of the cheapest homes in their local area. Back in 1996, if they had borrowed four-and-a-half times their salary, 90% of young adults in London could have done so.

Polly Simpson, a research economist at IFS and a co-author of the research, said: “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% 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.”

The research also revealed that after adjusting for inflation, average house prices in England have risen by 173% since 1997, compared with increases in young adults’ real incomes of only 19%.

Largely as a result, the share of 25- to 34-year-olds who own their own home fell from 55% to 35% between 1997 and 2017.

 

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