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Property Prices Rose 9 Times Higher Than Wages in Last 20 Years

Average price of a home since 1997 increased by 173%, compared to a 19% growth in wages for young adults

Residential Property Housing Market Prices

The Institute for Fiscal Studies (IFS) has released the headline figures from its upcoming IFS Green Budget, which will be published in full on Tuesday the 16th of October, ahead of the Chancellor’s Budget announcement at the end of the month.

According to their research, just 61% of young adults with a 10% deposit borrowing 4.5 times their salary would be able to buy the cheapest home in their area today, compared to 93% in 1996.

In London, just one-in-three (35%) would now be able to buy with the same sized deposit and borrowing multiplier.

Assessing homeownership rates over the last two decades, the IFS has found that the proportion of adult homeowners aged 25 to 34 has fallen from 55% in 1997 to 35% in 2017.

Since 1997, property prices in England have increased by an average of 173% after adjusting for inflation, rising to 253% in London.

However, real incomes for 25 to 34-year olds have increased by 19% over the same period, with real rents increasing by 38%. Across England, real prices have not risen in the last decade, except for London (30%), the South East (8%) and the East of England (10%).

Additionally, the research found that more young adults now (78%) would have to spend 6 months of their income to raise a 10% deposit on the median property in their area, compared to 33% 20 years ago, with the majority of this increase occurring between 1996 and 2006.

Although polices aimed at helping first-time buyers could help boost homeownership rates among young adults, the IFS warns that they risk increasing house prices and/or rents.

A new “Good Landlord” tax, which would relieve landlords from paying capital gains tax when selling their buy-to-let properties to sitting tenants after a three-year tenancy, has been proposed by Conservative thinktank Onward.

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