to be scared of the future? what will become of people like us?? pensions / housing related

[applejacket]

dh is 42, i am 34, we don't own our house, and never likely to (bad credit in past plus not high enough income for mortgage and barely any savings for deposit etc). we rent a council house atm

dh has worked FT consistently since 15 but he has only just started paying into his company pension as they have to now. but will probably be worth fuck all when he retires

i am a SAHM with 2 dcs, 4 and 7, and one on the way , i worked from 16 - 26 full time and last couple of years have done a bit of self employed cleaning work but hardly anything really and not doing it anymore now i am pg.

dh earns ok money but not enough to either get a mortgage, or save anything. we don't struggle day to day at all really, but dont really have anything to save. and recently i have been really worried about the future

i am intending to go back to work when the dcs are older but god knows who would employ me, i have no qualifications other than some average gcse's and a levels from nearly 20 years ago. and i can't afford to re train in anything either

what will happen to us when we are older?? when we are still renting and retired? will we be homeless? tbh its the fact we are renting that scares me the most, i would feel so much more secure if we owned our house.

i honestly sometimes feel that our only hope is a lottery win or something

We dont have capitalism.

We have Socialism for the rich and capitalism for the poor

These days unless you have an asset rich family it's very very difficult to escape your background.

Pendeen no, I'm a historical economist. Certainly not an estate agent!

The German housing market is not at all like my B economy. There are in fact much higher levels of owner- occupation in Germany than popularly believed. And German tenants enjoy some of the greatest tenancy rights and legal protections in the world. There is very little private or amateur landlordism, since this is heavily disincentivised by the legal protections accorded to tenants; many tenancies are through partly or wholly publicly or collectively-owned bodies.

And capitalism is not one simple system. Rent-seeking would be regarded by free-market capitalists as anti capitalist (because it mimics feudalism, takes away from productive capitalist investment and seeks to rig markets); whereas in neoliberal capitalism (which tends to capture profits upwards towards the rich), rent-seeking is part of the game (and the rich are on the winning side).

Historically in Europe (and particularly in the UK between 1918 and the 1980s) we had a form of socialist capitalism which looked to combine market capitalism with a degree of state ownership of production and social security, in which the state provided for the things that private enterprise would have found too risky, expensive or unrewarding to take on, or where there was a social consensus that they should be collectively owned for the wider social good - healthcare, utilities, the military, social security, education, low-income housing, pensions, and so on. Since the 1980s we have gradually been privatising some of those state responsibilities.

Housing owner-occupation in the UK rose steadily throughout the population growth of second half of the twentieth century, and is now starting to decline again.

Train - my understanding is that in Germany most people rent and save money through their working lives to then buy somewhere out right in retirement.

This seems a good bet - so that the employee workforce is flexible and can move for jobs etc - whilst retirees then decide where they want to settle with the pot of savings they have accumulated.

My understanding is you pay 4x the value of a loan for a mortgage over a standard term - so this should be factored in when deciding whether to rent or buy.

Also rents are due to supply and demand and the imbalance in the UK is due to the lack of building and planning. If the Govt stimulated a large house building initiative by relaxing planning laws property prices and rents would plummet - and those who have invested in property to secure their retirement would be up shit creek.....

Train -- To explain the negative effects of rent- seeking further, imagine that in the market where everyone owns a house, once the mortgage is paid off, each household can spend the money that would have been spent in housing into the economy, save, invest and so on. And each household needs a smaller pension because its housing costs are low, so it's easier and cheaper for households to save for retirement (since the cost of living is slightly easier to predict) and the cost of providing good pensions is lower. Surplus income then gets spent in ways that benefit the economy as a whole"

I don't get this - most people need to save for their retirement pension - whilst they are paying their mortgage - hence the under investment - as people need a roof over their heads today -- the suggestion that once mortgage is paid off - people can then invest in pension savings - looks to be too late in my book.

I also think that there is the assumption that if we continue to work til we are 70 etc - will be on the same salary we are now on in our 30/40s -- this is unrealistic - most people have a an earning plateau or peak before they are 50 - and are likley to find themselves out of work , or part time or on lower wages after this age - so even less money to invest in a pension AFTER paying the mortgage. Likelihood - is that people will have to downsize whilsts they are still working on lower wages in the last 3rd of their working life.

I wish we had a more sensible system like the Germans, but I'm thinking we've gone too far down the property price bubble route-a correction would just cause too much disruption?

Kittty - no: if you are paying a mortgage and a pension at the same time, you will need to pay less into your pension as you go, because you can assume that you will no longer need to cover mortgage/rent in retirement. Your pension is easier to save and plan for. During your working life you pay X amount mortgage plus an amount towards your pension to cover future Y: your food, bills, luxuries in retirement.

If you are only paying rent, you know you will need to pay enough into your pension to cover both living and housing costs in retirement. So you will need to pay X amount in rent (equivalent to a mortgage payment); plus enough into a pension to cover Y in retirement. Plus more into the pension to cover X in retirement too. Your pension has to be up to double the amount so you will be paying more throughout your life plus more in retirement too.

Obviously, this just isn't possible for most people, and historically (in the last 70 years) those who have rented tend to have lower incomes than those who have bought, so what happens is that renters can't save enough to cover housing costs in retirement, plus depend on the state pension, so the state has to pick up part of their housing costs in retirement via housing benefit, as well as their living costs via the state pension. The state ends up paying for any long-term social care needed, too, because houses can't be sold to pay for their care. Taxpayers then have to cover all of these elements. FWIW, the state pension is the biggest single charge on the benefits bill, easily dwarfing unemployment benefits and in-work benefits many times over.

Which brings us neatly back to the thread title. Ultimately, taxpayers will need to cover these costs because there will be a large number of people in the future who don't have enough pension to pay for living and housing costs, and those people will be a voting bloc, so it is hard to see society risking mass poverty or mass social unrest as a result.

BUT we have comprehensively messed up our economy by speculating in housing. In many ways our economy is the opposite of the German economy. The poster above who said Germany's economy is stronger than ours is right, but they are stronger partly because they had much stricter controls on rent-seeking behaviour and speculation during the long 1995-2008 boom (during which time they were frequently in technical recession). In the UK instead we sold the same houses to each other at increasing prices, driven primarily by speculation and financialisation in the credit markets, which sucked money out of productive areas of the economy into an asset price bubble. Now we are stuck with houses that are overvalued (with no-one in the next generation earning enough to buy them), but large numbers of people dependent on them to fund their retirements. And no money to spend or invest in manufacturing or anything else so that future workers can grow their incomes. A huge mess.

Yep it's a huge mess, I can't see how this is going to end well.

train - - where is the basic economic dynamic of supply and demand? - if the houses are over valued - then people cant buy them - then there is over supply and then the prices drop -- you see this all in every market and all over the UK country housing market - I think that you are talking from a London perspective.

Where do you sit in the calculation that it costs x4 of the loan you have taken out by the time you repay your mortgage with interest - if you just rented - you could save (with interest!) more than enough to buy a property for retirement....

I'm not in London but in an area of the SE where rents are huge - over 1200/month for 2-beds, so how are even people earning well meant to save alongside that (if they can afford them at all)?

Supply and demand is a bit of a red herring here be sure those terms don't apply in the housing market in the way that people tend to think they do. It is not a simple intuitive market so it's often misunderstood. The housing market is more macroeconomic than microeconomic, so the number of houses and the number of people don't affect prices as much as macroeconomic factors like the supply of credit and interest rate policy ("supply" in house prices tends to be credit supply rather than the number of houses themselves, since you can borrow money to buy a house). Prices tend to be a function of credit availability. Whereas rents are also affected by macroeconomic factors, but they tend to be a function of (local market) wage levels (since you can't borrow money to rent). There are other factors that affect pricing in both markets, but they are not at all obvious (and are not simple supply-demand functions).