A 173 per cent rise in house prices over the past two decades has fueled intergenerational inequality, according to an economic research body.
In data released today (8 October) the Institute for Fiscal Studies found a "clear economic difference" between older and younger generations, with homeownership among 25-34-year-olds falling from 55 per cent in 1997 to 35 per cent in 2017.
In a pre-released chapter of its IFS Green Budget, the body found the average property price in England had risen by 173 per cent since 1997 - compared with a 19 per cent increase in income among those aged 25-34.
The IFS said: "Rising house prices have benefited older generations at the expense of younger ones and increased intragenerational inequalities."
The institute said the disparity between property prices and income had seen the proportion of young adults who would need to spend more than six months’ income on a 10 per cent deposit rise from 33 per cent to 78 per cent in the past two decades.
But most of this increase occurred between 1996 and 2006, with recent stable or falling house prices outside of London and the south east and east of England making it slightly easier to now raise a deposit in the UK.
Even with a sufficient deposit, young adults were still found to be hindered by lending restrictions since most mortgage lenders were not willing to lend more than 4.5 times a borrower's salary.
The IFS found almost all young adults - 93 per cent - in 1996 could afford a property in their area if borrowing 4.5 times their salary but by 2016 this had dropped to 61 per cent.
The report concluded policies favouring young buyers, such as reducing stamp duty and easing planning restrictions, could see an increase in homeownership within this demographic.
Daniel Bailey, principal at Middleton Finance, said he agreed the main obstacle for homeownership was saving for a deposit and had been for some time.
He said: "The majority of first time buyers I see would be paying less for their mortgage payments than they would be paying in rent.
"The deposit is usually the main issue, if you are renting it is often very difficult to save."
rachel.addison@ft.com
