In 1995-96, 65% of 25 to 34 year olds with incomes between £22,200 and £30,600 a year owned their own home.
But by 2015-16, that figure had fallen to just 27%.
The IFS study highlighted the consequences of the disconnect between wage growth and changes to house prices in the last two decades.
The research showed house prices have grown around seven-times faster than average incomes of young adults.
Adjusted for inflation, the average UK house price in 2016-17 was 152% higher than in 1995-96, compared with a 22% rise in real incomes.
The drastic jump in property values meant that regional house prices are more than four times the annual after-tax family income of almost 90% of 25 to 34 year olds – and for 40% prices are over ten times their income.
Compared with twenty years ago, less than half faced prices over four times their income, and less than 10% had to deal with prices more than ten times their income.
Accordingly, homeownership has fallen in every British region, with the biggest falls recorded in the South East – which plummeted 32% over the period, while all other areas have fallen by over 10%.
“The fall in homeownership is entirely explained by the fact that young adults’ incomes are now much lower relative to house prices on average,” said the IFS.
The study also showed the effects of economic backgrounds on homeownership. Between 2014 and 17, 30% of young adults with parents in low-skilled occupations such as delivery drivers owned their own home, compared to 43% of those with parents in higher-skilled jobs such as lawyers and teachers.
In addition, those born in the late 1980s are much less likely to be homeowners in their late 20s than those born in the early 80s.
By age 27, 25% of those born in the late 80s owned their own home, compared to 33% for those born just five years earlier, and 43% for those born 10 years earlier.
The IFS study also comes as UK Finance figures showed that first-time buyer (FTB) numbers last year reached the highest number since 2006, with 365,000 people getting on to the property ladder.
Andrew Hood, a senior research economist at the IFS and an author of the report, said: “Homeownership among young adults has collapsed over the past twenty years, particularly for those on middle incomes – for that group, their chances of owning their own home have fallen from two in three in the mid-1990s to just one in four today.”
“The reason for this is that house prices have risen around seven times faster in real terms than the incomes of young adults over the last two decades,” Hood added.