(qlmbusinessnews.com via news.sky.com– Mon, 8th Oct 2018) London, Uk – –
The IFS says average house prices have surged 173% over the past 20 years, when a cheap home was in reach for 90% of young adults.
About 40% of young adults would not be able to buy one of the cheapest homes in their area – even if they managed to save a 10% deposit, research suggests.
Back in 1996, a property would have been in reach for 90% of 25 to 34-year-olds as long as they had a 10% deposit and borrowed four-and-a-half times their salary.
Fast forward to 2016, just 60% in this age range can do the same – leaving many thousands locked out of the market.
Researchers from the Institute for Fiscal Studies found the situation is worse for aspiring homeowners in London, where just one in three young adults could borrow enough to buy one of the cheapest homes in their area with a 10% deposit.
Average house prices in England have surged by 173% over the past two decades, compared with a meagre 19% rise in the real incomes of young adults over the same period, the report claimed.
In 2016, about 50% of young adults would have needed to save more than six months of their post-tax income to raise a 10% deposit for a cheap home in their area. The IFS estimates just 10% would have had to do the same 20 years ago.
Polly Simpson, a research economist at the IFS who co-authored the report, 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 IFS says that easing planning restrictions would help to increase levels of home ownership while reducing property prices and rents – giving relief to some Britons who will never own a property.
Its senior research economist Jonathan Cribb said: “The most economically productive and wealthiest parts of England – London and the South East – are those with the most restrictive planning constraints.
“It is unsurprising that these areas have also experienced the biggest house price increases. Increasing the responsiveness of construction to house prices is a necessary part of the solution, particularly in these areas.”
A spokesperson for the Ministry of Housing, Communities and Local Government, responded: “This government is committed to helping more people get on the housing ladder and last year saw the highest number of first time buyers for over a decade.
“Through our Help to Buy scheme and the cut in stamp duty for first time buyers we are helping restore the dream of home ownership for a new generation.
“Over 1.1 million properties have been built since 2010 and our targeted investment and planning reform will deliver more of the homes communities need.”