The children of homeowners hold a massive financial advantage over those whose parents do not own properties, it has been claimed.
The conclusion from the Institute for Fiscal Studies (IFS) think-tank comes after a government report revealed rocketing house prices have been boosting home owners’ annual salary – or giving a salary boost – over the past 20 years.
The area with the biggest salary boost in Britain is Kensington and Chelsea, which has seen an annual jump of more than £40,000.
The average property price in January 1995 in the Royal borough stood at £182,695, and had rocketed to £1,207,128 by October 2016.
However, if prices had risen in line with inflation, they would stand at £328,851. That means a rise of £878,278 after inflation has been taken into account – or £41,823 income a year on top of whatever salary the property-owner might have had.
The figures emerged as the IFS warned Britain’s wealth gap would be passed down the generations because the children of those with homes would be so much better off than the children of those without.
In west London, the figure stands at £24,319 per year since 1995 in neighbouring Hammersmith and Fulham. In Brent the annual increase stands at £18,131, £16,499 in Ealing, £15,733 in Harrow, £13,274 in Hillingdon and £12,453 in Hounslow.
On the implication of the findings, the IFS said: “Today’s elderly have much more wealth to bequeath than their predecessors, primarily as the result of rising homeownership rates and rising house prices.
“At the same time, today’s young adults will find it harder to accumulate wealth of their own than previous generations did, due to the sharp fall in homeownership, the dramatic decline of defined benefit pensions in the private sector and the stagnation in household incomes.
“Together, these trends mean inherited wealth is likely to play a more important role in determining the lifetime economic resources of younger generations.”
The IFS also concludes wealth attracts wealth, with more than half of those likely to secure an inheritance of £250,000 or more already having incomes in the top 20%of the population.
It concluded: “Looking at current pensioners, we find that those with the highest lifetime incomes are also those who have inherited the most across the course of their lives.
“High-lifetime-income individuals are around twice as likely as low-income individuals to have inherited something, and many times more likely to have inherited hundreds of thousands of pounds.