Over-45’s ‘stifling younger generation on housing’

The over-45s are driving the housing market, according to a new study. Picture: Robert Perry

The rise in home ownership since the mid-1990s has been exclusively driven by people over 45, a Stirling University study has found.

There was a net decline in home ownership amongst under-45s, but within that group were a rising number of younger people who bought their house outright.

This suggests younger people are increasingly reliant on inheritances to purchase a house, the study says.

Those without inheritances find their savings curtailed by rising private rents unless they stay with their parents, it said.

Meanwhile, the average pay of over-50s has been rising at a time when wages amongst 18 to 29-year-olds has been falling and younger workers are also more susceptible to unemployment.

The Scottish Government must use its new property tax powers to tackle the “inter-generational and intra-generational inequality” created by the housing boom, according to Professor David Bell, who led the study.

He will outline his findings in a David Hume Institute seminar entitled Inequality in Scotland - what are the causes and what are the implications? at the Royal Society of Edinburgh on Monday.

The study states: “Between 1994/5 and 2011/12 the number of owner-occupier households increased by 344,000.

“But over half of this increase was accounted for by households where the head of the household was aged 65 or over, and the remainder was accounted for by households aged over 45.

“Amongst those aged under 45 there was a net decline in home ownership.

“Despite this however, there was an increase in the number of younger households who owned their home outright (as opposed to with a mortgage) which may signal an increase in inequality of property wealth within the younger generation.”

The study adds: “House price rises are creating a situation whereby younger people are likely to be increasingly reliant on inheritances to purchase a property.

“Those who cannot purchase a property face a choice between living in increasingly expensive private rented accommodation, which limits their ability to save, or to remain living with parents.

“The house price bubble therefore seems to be increasing inter-generational inequality and as a result is likely to lead to increases in intragenerational inequality among subsequent generations.”

The research also finds marked differences in income between the generations.

“The young as a group appear to have been doing relatively badly in the labour market,” it said.

“Rates of unemployment among the young have risen relatively faster than those of prime age or older since well before the recession. And even among those in work, the wages of younger workers have fallen relative to those of older workers.

“The average hourly wages of young workers aged 18-29 has fallen over time relative to that of prime aged workers 30-49, but wages for older workers 50+ have grown relative to the prime aged group.

“One explanation for these relative wage changes is that younger people have been relatively unsuccessful in capturing a share of the growth in higher skilled jobs in recent years.”

Speaking ahead of the seminar, Professor Bell said: “The main purpose of the housing market should be to provide accommodation, but it now also seems to be a mechanism that sustains and magnifies inter-generational inequality.

“This might be an issue that a new Scottish Parliament with enhanced tax powers might wish to address.”

Ray Perman, director of the David Hume Institute, said: “If we want to create a fairer country we have to know how serious inequality is in Scotland and how it is affecting people.

“This research breaks new ground in quantifying the problem and gives us the evidence from which politicians can devise effective policies to tackle the issue.

“The David Hume Institute will be returning to the theme with its presidential lecture in November, when Professor Anton Muscatelli will give national and international context to the debate.”