Homeownership rates have plummeted for today’s younger generation. Hypothetically, it would currently take a 27-30 year old first time buyer around 18 years to save for a deposit if they relied solely on savings from their own disposable income (up from three years two decades ago). Rising unaffordability has led many first-time buyers (FTBs) to rely on family or friends to help with the deposit on their first home. The rise of the so-called Bank of Mum and Dad (BOMAD) is much-discussed but until now there has been little analysis of the strength of the relationship between parental support and people’s chances of becoming homeowners.
This paper fills this gap. Using a novel dataset which connects parents and children we are able not only to analyse the association between the property wealth held by people’s parents and their own, but we are also able to strip out the impact that other factors (earnings, education, etc) have on homeownership.
- At the age of 30 those without parental property wealth are approximately 60 per cent less likely to be homeowners than people whose parents are homeowners.
- Those with wealthier parents are more likely to become homeowners. Moving from the median amount of property wealth up to the 75th percentile increases the probability that someone’s children will become a homeowner in a year by over 11 per cent. Moving down to the 25th percentile reduces the probability by approximately 7 per cent.
- The link between parental wealth and home ownership chances remains strong even after adjusting for the greater home ownership prospects of those with higher earnings and qualifications (both of which are also related to parental wealth).
- The importance of parental property wealth has increased over time. In the 1990s and early 2000s 30-year olds with parental property wealth were approximately twice as likely to be homeowners as those without. From the mid-2000s we estimate that those with parental property wealth were almost three times as likely to be homeowners.