Rising house prices are preventing young people from purchasing property

Today’s property market, much like the stereotypical bouncer of a weekend nightclub, is asking the young for their ID and then preventing them from purchasing property, according to a recent joint report carried out by the BBC and Institute for Fiscal Studies. 

The report compared today’s market of home ownership for 25-34-year-olds, against the market of 1995-1996. The results clearly and unsurprisingly indicate that less people of this age group can now afford to own property. 

65% of the top-fifth earners for this age group, or households that earn a family income of £41,000 or more after tax, were able to buy their own home in 2015-16. This is a 20% drop from the same age bracket 20 years earlier where 85% owned their own property.  Although it is not terrible news for high earning households of this age group, the report highlights a dramatic decrease in home ownership. 

65% of Middle earners in 1995-96, those that earn between £22,200 to £30,600 after tax, owned their own home. Worryingly, this figure has slumped to 27% in 2015-16; a 38% decline in 20 years. 

The results highlight an even greater disparity and gulf between home owners in the lowest earning bracket. 19% of those earning £15,080 or less in 1995 could afford to buy a property; today’s figure stands at 8% ownership for 25-34-year-olds. A decrease of more than 50% in 20 years. 

The unfortunate reality of all this is that 40% of young homeowners earn household incomes in the top-fifth. This is a rare statistical increase as the figure was 30% in 1995-96, suggesting that the rise of house prices is creating a great economic divide between the wealthy and the rest. 

The institute of Fiscal Studies attributes these changes to rising house prices and relatively stagnant wage levels.     

Jonathan Cribb, Senior Research Economist at the Institute for Fiscal Studies, has commented: “Accounting for inflation, house prices have risen by almost 160% since the mid-1990s while young people’s incomes have grown by only 23%. This means that fewer and fewer can afford to get on the housing ladder. 

“This gulf can essentially explain all of the fall in the home ownership rate over the past 20 years, analysis by the Institute for Fiscal Studies suggests.” 

The report also shows how different regions have fared over the years, with the South-East and London showing the most significant changes. 

64% of young people in the South-East owned a property in 1995-96, this figure has plummeted to 32% in the current market. 

There was a 27% decline in London with 47% of young people in the mid-90s owning property in comparison to 20% nowadays. 

When these grave statistics are combined with high rental costs and a reducing bank of properties available, the results suggest that this age range is finding it increasingly impossible to save the necessary money to step onto the property ladder, leaving the proverbial bouncer barring the door to the majority of 25-34-year-olds. 

Have you noticed this considerable change over the past 20 years? Do you find the majority of homeowners to be older? Does this create a problem for conveyancers?  


Today's Conveyancer