Young people whose parents have property wealth are now almost three times as likely to be homeowners by the age of 30, compared to those whose parents have no property wealth, according to a new report published by the Resolution Foundation.
With the bank of mum and dad now considered to be a key lender for first-time buyers, House of the Rising Son (or Daughter), revealed for the first time how important parental property wealth is in determining younger people’s housing prospects.
The report found that in the mid-1990s and early 2000s, home ownership rates for the those aged 30 with parental property wealth were at 40 per cent – twice that of young people whose parents did not own a home.
Since then the gap has grown so that recent home ownership rates for 30 year olds with parental property wealth are at 25 per cent – almost three times those of those without parental property wealth.
The report highlighted measuring the direct effect of parental property wealth on their children’s home ownership is difficult because the bank of mum and dad actually pays out in other ways when it comes to children’s living standards. Along with a greater chance of achieving home ownership, young people with high levels of parental wealth are 74 per cent more likely to have a degree than those without parental wealth, and typically earn over £500 more per month.
However, even after accounting for these education and pay benefits, access to the bank of mum and dad is independently driving up young people’s home ownership. In fact, the report finds that parental wealth has now become such a significant driver of young people’s home ownership prospects that it is catching up in importance to more obvious drivers, such as how much young people earn.
Commenting, Resolution Foundation senior economic analyst Stephen Clarke said: “High house prices and sluggish wage growth have meant that being able to buy a home of their own is almost impossible for many young people without access to the bank of mum and dad.
“In fact, our housing crisis is so big that what your parents own is becoming as important as how much you earn when it comes to owning your own home. This is particularly worrying for the one in two millennials who aren’t homeowners, and whose parents also aren’t either.”
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