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Several years ago, my mum was telling me of the difficulty my sister and her husband were having getting on the property ladder. Both in stable employment, paid well enough for the stage they were at, kept getting massively outbid on affordable, suitable places in their area by people with way more capital. The common story of the first time buyer.
Barely pausing for breath, she then went on to tell me about her friend (similar age, baby boomer generation) who'd just bought a lovely flat not far from her, to add to her collection of properties to rent out. Well good on her, that's her pension said my mum.
HELLO!!!?!?!?
Politicians on both sides of the commons floor like to repeat the mantra that we need to build more homes. Doing that alone will solve absolutely nothing unless you control who can buy them.
I have some sympathy for buy-to-letters (I'm not one, so not that much!) who have had to watch financial deregulation hollow out their pensions so have changed investment strategy, but it's very much a case of pulling up the ladder behind you.
The whole situation is curious from a political point of view. Concentrating the housing stock in fewer and fewer hands is obviously what wealthy Tory supporters want, but does this fly in the face of one of Thatcherism's ideological pillars? The whole own-your-own-home movement may have created a generation of have-not Tory voters, but IMO the real idea behind it was the notion that a person who owes a mortgage will not rock the boat at work. This is how the trade unions were really beaten and the idea of any kind of collectivism in Britain destroyed for half a century.
Maybe in those days, people who saw through buy-to-let could live safe in the knowledge that the social housing stock and a functioning welfare state meant everyone could be assured of a basic standard of living but not now.
Maybe where we are now is what Thatcher and co wanted all along.
TL/DR - yes OP, I agree.
It feels that our economy is driven not by wealth being generated (work done, outputs of value, payment/wages, spending) but by virtual wealth creation from asset appreciation (house price increase, borrow against that, spend). To me that feels like a very well and vulnerable economy. If/when it fails it will likely be painful, for many except the bankers etc that created it.
It's a general trend going back decades where rewards (wages) from labour have stagnated, whereas 'rewards' (unearned wealth) from capital have gone through the roof.
It's unsustainable, for obvious reasons.
The majority lose, while a small percentage benefit enormously
Also do something about Trust funds
Yes, I'd make the policy a ban on unearned inherited wealth rather than a death tax, but the outcome would be the same. no handing over large sums of wealth to your kids.
A friend of mine has the mortgage deeds to his farmhouse going back to when it was built in 17thC. the first mortgage was for £110 pounds. It remained in a same family until it was sold to the MOD in the late 30's for £400 (with all the farmland), and changed hands a few times after that in the 50's and 70's. It's only recently (last couple of years) sold for just under a million - now without all the farmland . Bonkers really.
It’s a general trend going back decades where rewards (wages) from labour have stagnated, whereas ‘rewards’ (unearned wealth) from capital have gone through the roof.
Saw a good graph on that the other day...
[url= https://live.staticflickr.com/65535/51857051440_2670fd4ed4.jp g" target="_blank">https://live.staticflickr.com/65535/51857051440_2670fd4ed4.jp g"/> [/img][/url][url= https://flic.kr/p/2n1qWHN ]Union membership vs wages[/url] by [url= https://www.flickr.com/photos/brf/ ]Ben Freeman[/url], on Flickr
Please bear in mind that the government will pay 25% of all first time buyers deposit through the Lifetime ISA scheme – Save £4k per year, gov’t give you £1k bonus. So circa over 3 years at max contributions to get the full deposit assuming buying solo. Even faster if buying as a couple and can both save max contributions each year.
You realise that saving £4k a year is really not possible for alot of people right? Before changing jobs I was earning a low wage (this is in a proper factory job, not a paper round or icecream truck) and even without avocados and cars on finance I saved just enough to cover my conveyancer & survey etc (£2,000) over 4 years
Had I not got that 100% mortgage I would have been saving for that £12k deposit for the govt to add £3k to for what, 24 years?
Ah good, someone got there first.
As already said, rent is many times more than mortgage payments and mortgage companies are, frankly, arseholes who use "affordability" to rip customers off. Example, my father in law had £7k left to pay and wanted to change to a lower rate and longer term (by a year or two) but was rejected as it was unaffordable. LOLWUT? Sister in law was trying to get a mortgage but was penalised because she had taken a covid business grant (self employed). Madness.
TJ is spot on the money as well.
"House prices are silly. Every generation is getting more and more screwed unless the beneficiary of a inheritance or gift. High house prices drive all kinds of social ill. The solution is 100% inheritance tax and increased house building – we’re hardly running out of space."
Twaddle. .1% is unfair
Running out of room? So we turn our land into a building site do we? I agree that there are many ex industrial sites that could be used but the use of agricultural land is disgusting.
Omer thing I would stamp on is the trend to take small country properties and double them in size just to give 3 bath rooms and a bedroom for every child. Ban that sort of development and prices would stay a bit lower.
LIke many of our problems the elephant in the room is too many bloody people. Encougaing net emmigration would be a start.
Saw a good graph on that the other day…
There was a really good article by John Harris on inequality in the UK in the Guardian the other day, which used the same word in the title as this thread
Luxury at the top, privation at the bottom: Britain is becoming feudal in its disparities
A friend of mine has the mortgage deeds to his farmhouse going back to when it was built in 17thC. the first mortgage was for £110 pounds. It remained in a same family until it was sold to the MOD in the late 30’s for £400 (with all the farmland), and changed hands a few times after that in the 50’s and 70’s. It’s only recently (last couple of years) sold for just under a million – now without all the farmland . Bonkers really
My grandparents house cost them £375.
It took them 17 years to pay it off.
Interest rates were quite a different thing back then.
100% inheritance tax is the way,
This is so naive and illustrates perfectly why we are in this situation. The problem isn't the people paying IHT or not paying it at x%, the problem is the people avoiding it completely. Take the Duke of Westminster or whatever his name was when he took over half of Mayfair a few years back. Around £9 billion pounds he inherited I think and not a penny in IHT. Had IHT been set at 100% he'd still have paid nowt.
LIke many of our problems the elephant in the room is too many bloody people. Encougaing net emmigration would be a start.
Where are we all moving to then?
Strewth , we have some right nasty little socialist here don't we? What a good idea. "Lets take everything away from anyone with more than me". It's the thought that peo (as well as all the nice ones)ple can pass something on to their children or may be set them up in life that stops them blowing it all when alive. Of course plenty still do that and then live off the sate whilst the prudent save it for their children and then have to pay their own old age care. Real fair isn't it?
he’d still have paid nowt.
That's why it's a ban on unearned inherited wealth we need, not a death tax.
“Lets take everything away from anyone with more than me”
For the avoidance of doubt, I'm going to inherit a "shit load". There's 3 houses in the south of England within commuting distance of London that have my name on the will. If you want the outcome to be "let's make it difficult for intergenerational hoarding" so that there's a fairer outcome for everyone, then that's a really simple and transparent way of doing that.
Says
Strewth , we have some right nasty little socialist here don’t we?
Then says...
plenty still do that and then live off the sate whilst the prudent save it for their children and then have to pay their own old age care.
Sorry but there's only one person being particularly nasty here.
given we live on an island with a finite amount of space for building houses
There's plenty of space. The problem is that we let supply and demand determine the price of an essential commodity. How is that even remotely fair?
Many people would be able to afford to get on the housing ladder if they were willing to make the sacrifices that used to be made.
Why should poor people have to make sacrifices just to put themselves in a position where they aren't forced to hand money over to rich people in order to survive? Rich people don't have this problem, do they?
Things people want:
Big homes
Short commute
Lower cost homes
Lower heating costs
If you're middle class maybe. Some things a lot of people want but can't have:
Security
A place that feels like home cos you're in charge of it
Spare disposable income after
Something to eventually own and pass on to your kids
LIke many of our problems the elephant in the room is too many bloody people. Encougaing net emmigration would be a start.
No, it's not doing anything about the problems. A government COULD fix these problems. There are plenty of solutions, rolled out across many other countries in the world. So why not here? We're all keen to look at America and marvel at how Americans don't know their government is ****ed up. Well, ours is to, and we apparently don't know either.
The problem is supply and demand.
The population has been growing by 400-600k ish people a year since the early 2000s but even record house building volumes have failed to keep pace with that.
People rightly expect local controls on what can be built, and in many areas protest against tall buildings where the density of new dwellings is higher.
Unless we’re willing to limit the growth in population size to allow house building to “catch up” or accept less control on what can be built / where it’s built the house price inflation will remain.
There’s also the issue of people’s willingness (or lack of it) to move to new areas where housing can be a lot more affordable. In many cases even moving 5 miles can make a massive difference to affordability.
That was a big wage in 1992!
£22k?
No it wasn't, it was an average wage for a skilled employee.
There’s no way the UK could be competetive manufacturing plastic tat for the masses unless we go full Brexit and become like North Korea, cut ourselves off from the world and massively reduce living standards etc….
as you can probably tell i’m not an economist, but that’s what i kind of envisage, but not for all the population. i doubt it will happen just a dark thought i harbour.
It would be nice to see all the empty department stores and other retail properties being turned into something useful. Not sure how feasible housing would be, but Gloucester uni are turning an old Debenhams into lecture halls: https://www.theguardian.com/business/2021/mar/17/gloucester-university-buys-debenhams-store-to-use-as-lecture-halls
There’s also the issue of people’s willingness (or lack of it) to move to new areas where housing can be a lot more affordable. In many cases even moving 5 miles can make a massive difference to affordability.
That's because people don't want to be forced into a shitty commute and spend hours on clogged roads or overcrowded inconvenient public transport. Again, problems that can be solved. If you want people to move to an area make it easy to travel to and from, make the environment nice and put facilities in that people want. UK governments don't do things like this, they just let whatever happen, so we end up with ****ed up situations.
This isn't really a supply and demand problem, but it is locally. Really the answer is a wealth component to annual income tax and making renting a lot less desirable as a proposition to earn money but both will be hard for any government, let alone this one , to apply
The problem is supply and demand.
Or rather artificially constrained demand aka our planning system.
It would be nice to see all the empty department stores and other retail properties being turned into something useful.
They changed planning regs to allow this eg with empty offices. They generally make for horrible homes, some have no windows at all eg take an open plan office, sub divide it up into small flats. Nice ones get a window or two, some get nothing.
£22k?
No it wasn’t, it was an average wage for a skilled employee.
Yep, half way between median and mean.
move to Frizington
Ahh, Friz, the le Touquet of the Costa del marra. Just had a look and they're building a big estate of execuboxes for up to £450k, presumably targeting the newclur pound. Friz. Gentrified. A-MAZE-BALLS.
You can still get a shit box for 50 grand tho
There was a really good article by John Harris on inequality in the UK in the Guardian the other day, which used the same word in the title as this thread
Luxury at the top, privation at the bottom: Britain is becoming feudal in its disparities
I feel vindicated for my use of metaphor!
It would be nice to see all the empty department stores and other retail properties being turned into something useful.
Old Co-op department store
https://www.zoopla.co.uk/for-sale/details/60594340/?search_identifier=32f58f289da63cbf8b03189d0f95e571
Old DSS office
https://www.zoopla.co.uk/for-sale/details/60604390/?search_identifier=32f58f289da63cbf8b03189d0f95e571
It's happening, I've been in a few, including these buildings. Biggest problem is lack of windows in inner rooms, I'd not choose to live in one long term. Some really nice solutions possible, but they should mandate windows in liveable rooms in the design and if that means spaces in the middle used as gyms/workspaces/bike garages so be it, but that wouldn't maximise profit.
"Really the answer is a wealth component to annual income tax "
wbo - but that's what we have:
- receive rent from a property -> pay tax at the marginal rate irrespective of any costs incurred - even if that means you pay tax and insure a massive loss
- make a capital gain from shares / property -> pay tax at the marginal rate
- receive a dividend -> pay tax at the marginal rate based on other earnings
- receive pay -> pay tax per income thresholds
- earn over £12.5K -> pay 20% tax
- earn over £37k -> pay 40% tax
- earn over £65K -> lose entitlement to child benefit etc
- earn over £100K - > lose entitlement to state funded childcare and your personal allowance as well
- earn over £150K -> pay 45% tax
What other "wealth component" do you have in mind?
I have to shrug at those who insist that my wife and I really need to inherit about 4 houses worth about 2 million quid without even a penny of tax being taken off this entirely unearned and undeserved windfall. I think it's plainly stupid and incredibly bad for the country as a whole, but if you're going to force it on us, well I suppose we can give a large part away to charities (already have, in fact) and will cope with whatever we choose to keep. We already have a house and enough money thanks to moderately successful careers and a bit of decent luck in circumstances.
The *vast* majority of inherited wealth goes to people in their 50s and 60s who are already rich homeowners. Really, I saw the statistics once, it's a staggering proportion. Sadly, the majority of voters are small-minded idiots who can't see past "their" inheritances that they are either desperate to grab, or equally desperate to use to buy some sort of loyalty and respect from their spawn. Have none of them any self-respect?
make a capital gain from shares / property -> pay tax at the marginal rate
Just as a quick correction to that, no you get the first 12k entirely free of tax and *everything* free of tax if it was inside an ISA.
Yep, half way between median and mean.
it was a big wage, halfway between median and mean HOUSEHOLD INCOME, not median and mean salary.
5 years later (closest I could find at a quick search) a normal nurse salary was £13k
source -> http://news.bbc.co.uk/1/hi/health/background_briefings/nhs_pay_99/265087.stm
Yep, half way between median and mean.
That graph is mental.
Disposable income has barely, if, doubled. Meanwhile house prices?
Granted interest rates where going daft at that point but still...
Disposable income has barely, if, doubled. Meanwhile house prices?
Mainly interest rates falling explains the difference, the cost of borrowing has fallen which means people can afford to borrow more, so house prices rise to absorb the extra affordability (as supply is constrained by planning rules).
I also checked the ONS data, average wage for somebody aged 30 non manual was around £16k. £22k was a good proportion higher.
If you’re middle class maybe. Some things a lot of people want but can’t have:
Security
A place that feels like home cos you’re in charge of it
Spare disposable income after
Something to eventually own and pass on to your kids
I think you're conflating middle class and poor there Molgrips, even more so than you tried to imply I was.
I illustrated people's wants, you'd be hard pushed to find someone that doesn't want a bigger home. You're mixing that with their needs. And they don't have to be mutually exclusive. We just need to work on delivering something better than more unaffordable suburbia that then drives long commutes and climate change.
As for leaving something for the kids, that's the opposite of what's needed. For a start, most kids will be retired (if they're lucky anyway) by the time their parents die. At best they'll inherit from their grandparents at about the time they need to buy a house. Which leaves them with (on average) a quarter share if the parents pass it straight on. Joe Blogs getting a quarter share in a 2 up 2 down in Brotton worth £20k doesn't improve social mobility when Jacob Rees Blogs gets his share of half of Shropshire.
Many people would be able to afford to get on the housing ladder if they were willing to make the sacrifices that used to be made.
Go on, say avocado on toast, you know you wanted to.
The irony being that every time inheritence tax is discussed, it’s all the people stuck at the bottom of the ladder who are up in arms about it….
I don't think so. I'm pretty sure those at the very bottom of the ladder don't know what inheritance tax is, and certainly have absolutely no hope of inheriting close to the threshold.
One thing which is back to front about inheritance tax is (AIUI) the calculation is based on the value of the estate not the value any individual inherits.
I’d ban unearned inherited wealth. Ie 100% death tax. It would solve a bunch of issues not least house prices. I don’t think it would be popular though.
100% taxation is never a good idea - it just makes people come up with ways to dodge tax. Much more logical to treat as income then the poorest pay nothing on very small inheritance, the slightly better off pay 20% and those who need it least pay 40-45%. There may be arguments for letting you spread that across multiple tax years or perhaps between couples etc. But it would be radically different from the current situation where you can inherit a £1M property from your parents (combined IHT allowance) and pay nothing in tax!
Avocado on toast
What was your generations frivolity?
LSD? LPs? Owning more than two sets of clothes and washing more than once a week?
And what did your elders have to say about that?
mattsccm
Strewth , we have some right nasty little socialist here don’t we? What a good idea. “Lets take everything away from anyone with more than me”. It’s the thought that peo (as well as all the nice ones)ple can pass something on to their children or may be set them up in life that stops them blowing it all when alive. Of course plenty still do that and then live off the sate whilst the prudent save it for their children and then have to pay their own old age care. Real fair isn’t it?
100% tax is stupid - but the affluent can hardly complain that its not fair they don't get benefits because they haven't splurged all their cash - if they want to they could take their chances and pop it all on red then see how good the benefits system really is and state funded elderly care, after all there's nothing to lose is there?
Strewth , we have some right nasty little socialist here don’t we? What a good idea. “Lets take everything away from anyone with more than me”.
That's a straw man. Socialism is about making sure everyone gets a fair share of the products of their labour. Only people who have an over-inflated sense of their own worth get upset by this.
But in reality, most people on the left are talking about what's called Social Democracy. Where the government creates a base level of support for everyone to help you overcome the problems you might have, when you don't have the money to buy your way out of the problem yourself (or even if you do). Basically, give people the help they need. If you think that's wrong, you're a selfish arsehole. Yes, it might mean that people who are well off have to give a bit more - well, boo ****ing hoo, they'll still be well off.
Those who acquire and grow market assets asap accumulate wealth. Whether it's property, shares, collectibles, not all routes are unaffordable, but not beginning asap and then sticking at it is the blocker.
I grew up in a poor area in Stoke and went to one of the lowest performing schools in England. Zero financial help from parents with anything.
This is meaningless as a comparison if we don't know your income whilst saving and when you purchased the house.
To show the point our home cost us around £70k in 1996 and was roughly twice our household income. I'm now zero hours, minimum wage type and we would be hard pressed to rent and save for a deposit in our town if attempting to buy a 3 bed semi.
Because even in this magical utopia where housing cost is literally the price of the bricks and mortar its built of
No, the cost of the house is mainly determined by land supply, the cost of putting it up is not insubstantial but labour, timber (literally grows on trees), bricks and mortar are not in short supply. Land, however, is no longer being made and is a finite resource.
Those who acquire and grow market assets asap accumulate wealth
Yes, and the more money you have to begin with the more you can make. Let's say you are a nurse. If your Mum gives you £40 for your birthday, and you buy a collectible Star Wars figure, you might sell it 10 years later for £100. Meanwhile, in order to get a place to live you've paid £800 a month or roughly £100k to someone else. You've made £60 in that decade.
If you're still a nurse but your Mum is rich, and she gives you £40,000, the bank will now lend you the rest of the money for a £200k house. In ten years you've paid £750/mo or so to the bank (instead of to a someone else), your house is now worth £300k, and you've made £170,000 which I think you'll agree is a bit more than £60. Even though you've done exactly the same job and had the same disposable income as the previous example.
That is why it's much easier for some people to accumulate wealth than others, without having to do any more work whatsoever.
es, and the more money you have to begin with the more you can make.
This is sadly true and the rule doesn't just apply to money, it applies to all sorts of variables like IQ, creativity and other latent competency based skills that when applied with dilligence and industriousness, result in financial rewards.
Many of these variables aren't quite as earned as we would like to thing; much of the data is showing us that there is an inherited element to these variables that might account for as much as half the outcome.
It's why we need to tax success.
What was your generations frivolity?
LSD? LPs? Owning more than two sets of clothes and washing more than once a week?
And what did your elders have to say about that?
I think you vastly overestimated my age, missed who that comment was aimed at (it's not my comment, it's my reply) and missed this gem of advice given to Millenials by a millionaire Boomer a few years ago.