Are children of wealthier parents more likely to own their own home?
It’s a fact most of us know: less young people than ever own their own homes. Whereas in 1996, 55% of 25 to 34 years olds were on the property ladder by 2016 that figure fell to just 34%. The figures are clear, but the reasons why are more complex.
It’s undeniable that property prices are rising at a faster rate than incomes. In the last 20 years, average UK house prices have grown by 152% but average family incomes have only grown by 22%. Many people simply do not have the money coming in to save for a deposit or afford monthly mortgage payments.
But this doesn’t tell the whole story. The Resolution Foundation has today released research showing that, even when discounting salary, education, location and marital status, the chance of an individual owning their own home is still impacted by the property wealth of their parents.
The research demonstrates that , by the age of 30, those whose parents do not own their homes (which is strongly linked to financial wealth) are approximately 60% less likely to be homeowners than people whose parents are homeowners. The greater the wealth of the parents, the greater the chances of their children being homeowners.
It also appears that the impact of parental property wealth is on the rise. The research found that in the early 1990s and early 2000s, 30-year-olds whose parents were homeowners were on average 1.3 times more likely to become homeowners. It is now estimated that those whose parents own their homes are almost twice as likely to be homeowners.
The finding that children of wealthier parents are more likely to be homeowners will not surprise many. However the fact that it stands as an independent factor, quite aside to the would-be purchaser’s income and education, is more intriguing. The ‘Bank of Mum and Dad’ is still not fully understood in today’s society, but it appears it has an ever increasing influence on the lives of young people today.
Are you the “Bank of Mum and Dad”, helping your children or grandchildren to buy their first house? Our specialist lawyers have lots of experience in helping families to negotiate the path to home ownership. Contact them if you are thinking of giving your child or grandchild financial support as good legal advice is essential in understanding how best your aims can be achieved.