Young adults today are significantly less likely to own a home than those born five or 10 years earlier, according to research by the Institute of Fiscal Studies.
At the age of 27, those born in the late 1980s have a homeownership rate of 25 per cent compared to 33 per cent for those born five years earlier and 43 per cent for those born a decade earlier.
The research found the falls in homeownership were sharpest for those young adults with middle incomes, as the huge increase in house prices has outstripped income growth.
The IFS found mean house prices were 152 per cent higher in 2015-16 than in 1995-96 after adjusting for inflation but the real net family incomes of those aged between 25 and 34 only grew by 22 per cent over the same period.
The IFS's report said: "This increase in house prices relative to family incomes fully explains the fall in homeownership for young adults.
"The likelihood of a young adult owning their own home given how their income compares with house prices in their region is little changed from 20 years ago.
"But in 2015–16 almost 90 per cent of 25- to 34-year-olds faced average regional house prices of at least four times their income, compared with less than half 20 years earlier.
"At the same time, 38 per cent faced a house-price-to-income ratio of over 10, compared with just 9 per cent 20 years ago."
But the research also found that since house prices had stopped rising faster than incomes in recent years, the decline in homeownership had slowed.
The research also found that young adults were more likely to own their own home if their parents were from a higher occupational class.
Among 25- to 34-year-olds, 43 per cent of those with a high-occupational-class parent own their home, compared with 36 per cent of those with a middle-occupational-class parent, 30 per cent of those with a low-occupational-class parent and 18 per cent of those in the group from a workless household.
The research note said: "One likely channel that would lead to there being a gap in homeownership rates between young adults from different backgrounds even after controlling for their earnings and other characteristics is that higher-occupational-class parents have higher wealth and hence are more able to help their children with a deposit for a home.
"However, there could be other reasons, such as differences in preferences or perceived norms around homeownership (which we do not observe in the data)."
The IFS controlled for characteristics in the young adults themselves - such as their gender, age, gross earnings and education - and found these explained around three-quarters of the homeownership gap between those from a lower occupational class and a high occupational class.
damian.fantato@ft.com
