LONDON — Rising house prices and stagnant wages mean that it now takes twenty years for low- and middle-income households to save for a deposit, according to research from policy group Resolution Foundation.
As recently as 1997, it took just three years for the average low- or middle-income household to save for a deposit, but that figure rose to a peak of 26 years in 2009, and the figure currently stands at 20.
Take a look at the chart:
It is a generation-defining issue: millennials are gradually having to abandon their dreams of buying a house. Overall home ownership in England dropped over 7% between 2003 and 2015, but the decline among those aged between 25-34 was far more dramatic, falling by over 20% to 36.7% in the same period.
So what’s happening? There are three principle reasons that house-buying has become increasingly unaffordable in the past two decades:
1) Rising house prices: Barring a few blips, house prices have risen steadily for the past few decades, despite signs of a slowdown in 2017. Take a look at this chart:
2) Stagnant wages: Low productivity and rising inflation mean that the chronic problem of stagnant wages is not going anywhere. Research from the University of Cambridge found that the real wages of British workers will be practically the same in 2025 as they were in 2004.
3) Difficulties with mortgages: Figures published on Tuesday by the Bank of England show that mortgage lending is over 7% lower than 12 months ago. Stricter regulations and increased caution from banks in the wake of the Brexit vote mean that banks may continue to hand out fewer mortgages.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.