There has been a hefty increase in the number of young adults living with their parents and brokers believe this is down to the challenges first-time buyers face when buying a property.
Data from the Office for National Statistics, out yesterday (August 7), showed the number of young adults living with their parents had risen 24 per cent in just a decade, with one in four living in their family home last year.
The data showed 3.4m 20-34 year olds lived at home in 2018, compared with 2.7m in 2008.
The number of potential first-time buyers living at home is still on an upward trajectory despite slowing down in recent years.
Between 2016 and 2018 there was a 3.3 per cent rise in that group compared with a 20 per cent increase between 2007 and 2012. Before 2003 this number was steady or declining.
Source: ONS.
According to the ONS, larger numbers of young adults staying at home for longer was due to the cost of renting or buying a home, alongside changing living patterns such as staying in education and training for longer, formalising relationships and having children at older ages.
Further data from the ONS showed the percentage of 25 to 29 year olds owning their home decreased from 55 per cent in 1996 to 30 per cent in 2015, while the number of 30 to 34 year olds who had a property decreased from 68 per cent to 46 per cent in the same time period.
This means renting became more common than home ownership for 25-29 year olds in 2004, and for 30-34 year olds in 2011.
Source: ONS.
But the increase in renting has been largest for householders who are aged 20 to 24.
Only 9 per cent of 20 to 24 year old householders owned their homes either outright or with a mortgage or loan in 2015, down from 30 per cent in 1996.
Part of the problem for first-time buyers stems from the ratio between their income and house prices.
Between 1971 and 1999, first-time buyers could purchase a property worth between two and three times their annual income.
After 2000, this ratio increased rapidly — driven by house prices and slow wage growth — and reached a peak of more than 4.5 times the average income, remaining stable since then.
Source: ONS.
Dan White, director at Champion Hall & White, said the house price to income ratio was the “key issue” first-time buyers faced when looking at property in the current market.
He said: “Some first-time buyers are benefitting from the fact their parents and grandparents bought before house prices increased and therefore increased the equity, but there will be lots of people who do not have that passed down to them.”
Mr White said even those buyers who were able to gain a deposit for family members had then struggled to meet the income to ratio required to buy a house.
He added: “Even government housing schemes like Help to Buy still have a strict 4.5x income to house price ratio. So it’s not because of the monthly payments and in lots of cases, it’s not because of the deposit.
“The income ratio barrier means most properties are completely unaffordable to those on modest incomes.”
Daniel Hegarty, chief executive at online mortgage broker Habito, said although lenders and banks were innovating to help buyers with lower deposits and developing ways for families to help their children get on the property ladder, the figures made it clear “more needs to be done”.
He added: “Just last week we saw the latest statistics showing the impact of stamp duty on housing transactions.
“While first-time buyer relief has had a positive effect on many young people who are in a position to buy, overall the impact of the rise means many people have been put off moving up the ladder or downsizing, causing a bottleneck on suitable properties for newer buyers.”
A recent report from Santander showed the dream of homeownership at a young age would be over in the next decade without urgent action from the government and industry.
Its study showed although nine out of 10 young people wanted to get on the property ladder, the reality was that by 2026 just one in four under 34s were set to achieve that goal.
imogen.tew@ft.com
What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know.
