Young adults are more likely to be in the buy to let sector and less likely to be homeowners than those born five or ten years earlier according to the IFS.
A 152 per cent increase in average property prices has led to a decline in homeownership and a boost in the buy to let sector. The institute of Fiscal Studies (IFS) found that those who were born in the late 1980s had a home ownership rate of 25 per cent. This is in comparison to 33 per cent for those born five years earlier. Those born in the mid 1970s had a homeownership rate of 43 per cent. In 1995-96, 65 per cent of people with a mid-range income owned their own home, a figure which has sharply declined to 27 per cent twenty years later.
According to the IFS, the main reason for the decline is the sharp rise in property prices in comparison to incomes. Mean property prices were up 152 per cent in 2015-16 in comparison to 1995-96. In contrast, real net family incomes of those aged 25-34 has grown by just 22 per cent over the same period.
This disparity between property prices and family incomes has led to a surge in people joining the buy to let sector. The ratio between the average property price in the region where a young adult lives and their annual net family income has doubled from 4 to 8. All of the increase occurred by 2007–08.
Senior research economist at the IFS and an author of the report, Andrew Hood, said: ‘Home-ownership among young adults has collapsed over the past 20 years, particularly for those on middle incomes – for that group, their chances of owning their own home have fallen from two in three in the mid-1990s to just one in four today. The reason for this is that property prices have risen around seven times faster in real terms than the incomes of young adults over the last two decades.’