there's never been a worse time to be young and British, your screwed if your under 30

[lhldn]

OK the title is taken from a torygraph article, but I do find myself agreeing with it and being sad for the next generation.
www.telegraph.co.uk/men/thinking-man/11231796/If-youre-under-30-bad-luck.-Youre-screwed.html
We’re all becoming depressingly familiar with the results of these policies. The single worst (and most easily grasped) problem is housing. Our housing market has become an in-and-out club. If you’re over 50, in addition to your primary residence, you may well own a couple of buy-to-lets which will augment your already well-upholstered pension. If you’re under 30, you’re screwed.

If you’re under 30 in London, you’re super-screwed. You’ll be in your 40s before you’ve saved enough to buy a dump in Catford. And even then it’s likely that you’ll be outbid by a buy-to-let investor or, increasingly and tragically, refused a mortgage because you’re too old.

A long list of policies across three very different governments has got us here. The “one off” sale of council houses to make us all Tories in the 1980s - over two million homes that went cheap, often criminally cheap. The bottom three rungs cut off the ladder, the proceeds pocketed and the houses never replaced. Even so, property was still cheap back then – and if the housing market was anything like a free market, we might still be alright.

However, for all their devotion to the free market, our leaders have shown no interest in allowing the housing market to function this way. Rather, each year, we build a tiny fraction of what is needed ensuring prices march endlessly upwards. We have no coherent national housing plan. Our planning system is a mess. We have artificially low interest rates. We sell homes off-plan to foreign investors and don’t build enough to house the immigrants who are vital to our economy. The result is an cruelly dysfunctional market – and one which works brilliantly for your parents.

In tandem with this, over the last few years we’ve done a great job of increasing the wage gap between age groups. Guess who low wages hurt? Not people in their 50s and 60s. In fact, they actually help older people as they as more likely to be investors and employers. So, there’s no house for you, but the people who vote can afford a cleaner for their holiday home.

Housing is the most pressing problem

The property price rises are indeed irrelevant unless you want to move.

We bought our house at the lowest point in the market (in this area) and were also lucky in that the people we bought from were desperate to sell. We bought in 2009. Our house is now valued at half as much again. Part of that is the increase in the market, part is that we got it for a particularly good price and a big part is that we have spent money on doing it up.

It's completely irrelevant though since this is our forever house. By the time we come to sell when we can't get up the stairs anymore (or we realise our feeble private sector pensions aren't going to support us for much longer) the market might be completely different. I'm 40 now. I'm hoping we're in this house for the next 30 years.

The prices are very relevant for first time buyer though.
To be honest, if a landlord let me decorate and gave me a 5+ year lease, I wouldn't buy

Related program on now on Radio4 which offers evidence of property developers approaching council tenants with cash backing for 'right to buy' if they agree to split the proceeds of the house at point of sale. One man said he'd made a mint doing this over the years.

YANBU

To me, this the same problem as in the "internship" thread that was on here last week.

Yes the young are screwed but they don't half buy a lot of tat to put in the houses they haven't got.
I'm 33. I loved to shop for years but have mended my ways to some extent. My MIL and GMIL see no need at all for all this nonsense we buy.

I agree with OP. But there are SOME entitled kids out there who would rather spend on drink, designer stuff and latest gadgets than save for a deposit. If you work it should be possible to live with parents and save a deposit over a few years - but you can't have it all. I'm not saying every young person is like this but I've heard a few examples of kids being feckless recently.

I don't really see why unearned gains in house prices have a special right to be tax-free when earnings are taxed, spending is taxed via VAT and stamp duty, investment income is taxed, any other asset gaining in value is liable to CGT. I just don't see why house price gains are sacred - except of course that they are apparently the only reason anyone works (not to have a house to live in, but to watch it gain in value).

Other increased taxes on property might also work to reduce house prices but this one seems fairest to me as the burden is borne most heavily by the luckiest.

I guess I'm unlikely to agree with you on this one. I think the attitude of house as investment vehicle and viewing gains as hard earned is quite common which will mean any action to try an calm the market and level the playing field or the young will be unpopular.

but there are SOME entitled kids out there who would rather spend on drink, designer stuff and latest gadgets than save for a deposit

Not even 'entitled' - that's puts a horrible slant on it. Just people who are more 'jam today' than 'jam tomorrow'.

It's also not actually 'feckless' to live in rented property you know!

Also, it should be possible for everyone to live with their parents and save? Oh right, sorry, looks like my parents didn't get the memo about living somewhere with actual decent jobs so I could live at home and work and save!

Meh, all this doom and gloom is over hyped on MN.

I just don't see why house price gains are sacred

It reduces housing mobility and there will be less opportunity for people to get on the bottom rung.

If you buy, sell in a few years and have to pay CGT on the gain, you have to save even more money to be able to make the move. Keeping people in their current homes for longer and reducing liquidity in the market.

Handsoff I don't really see why unearned gains in house prices have a special right to be tax-free when earnings are taxed, spending is taxed via VAT and stamp duty, investment income is taxed, any other asset gaining in value is liable to CGT. I just don't see why house price gains are sacred - except of course that they are apparently the only reason anyone works (not to have a house to live in, but to watch it gain in value).

I did attempt to explain (based on necessity and constitutional rights to property, as well as inherent risks) and another poster has explained mobility to you, but you haven't taken it in. If you do have difficulty understanding these concepts, a course in the above topics might assist?

Your argument is that some other countries (but not this one) have a written constitution which specifically protects people's right to a property without tax being applied.

You suggest we could argue that we are similar. It's hardly a cast iron argument. Other countries do apply CGT to main residences - eg the US. (Where the average house is less than 3 times average earnings BTW). Other countries apply wealth taxes.

As to mobility I don't agree that our high prices aid mobility. If everyone had CGT applying to their gains, second-time buyers would have a smaller budget for the next house. Due to lower demand, the 3 bed houses would drop in value.

This would bring them within reach of some first time buyers (like the "B"s of my example). As some first time buyers are no longer going for the starter homes these would also drop in value.

Essentially, this is the reverse of the things happening during the house price boom.

The only people who do well from high prices are those downsizing and owners of multiple homes . For the rest of us, it is just somewhere to live. If it becomes cheaper, more income is left for other things.

If the reason it is cheaper is that billions have been raised for the treasury, perhaps there'll still be an NHS and state pensions when we get old.

That's one of my arguments Handsoff. Its the concept of a right to property, which is a necessity, being enshrined in law. It encompasses more than one concept, but it is a pretty fundamental basic right in all civilised legal systems, and it explains why main residences tend to be treated differently to other heritables and moveables by governments. If you start attacking property rights, you risk, as a government, attacking the fundamental principles on which society is based. Its a very dangerous line to go down.

But I did give three other reasons.

Basically, your proposal isn't a goer. Tackling rising property prices doesn't justify ripping up the rule of law and fundamental rights. It wouldn't be popular with the electorate and would be political suicide for any party that introduced it. It would have an unquantifiable impact on the market and the economy and would also be heavily retrospective in nature - I doubt people would accept having made the biggest financial decision of their lives on the basis of one set of tax rules ripped up and replaced with something completely different. Which brings us back to the rule of law and the notion that laws should be certain and not changed too frequently so that individuals can plan their lives accordingly.

I still think raising IHT and tackling gifts as deposits is worth looking at, as it would help to level the playing field while retaining individual motivation.

Your argument is that some other countries (but not this one) have a written constitution which specifically protects people's right to a property without tax being applied. You suggest we could argue that we are similar. It's hardly a cast iron argument. Other countries do apply CGT to main residences - eg the US. (Where the average house is less than 3 times average earnings BTW). Other countries apply wealth taxes.

By the way, that's not what I said, and that's not what the previous poster who described the situation in the US precisely said either.

As I said above there is no cash to use if you will live in your house for 40 years as I will. It's not the same as a gain in a second home or the gain on shares you invest in which are taxed as you could sell them and still have a home. I don't think any political party wants to tax home owners on capital gains which by the way used only to be taxed after allowance for inflation which was better CGT system for those other assets types.

The mansion tax is a cruder proposal as it taxes you on gains you may not have made and cash you may not have (you pay mansion tax on a negative equity property even if you have no other savings and no assets at all which is why it is worse than a capital gains tax on all homes).

Okay think of those that gain when property prices increase:
a) Government (stamp duty)
b) Estate agents
c) Those downsizing
d) Mortgage companies

Those that pay
a) Our children/their children/our nieces and nephews.

Think if all costs invested in maintaining/extending/redecorating a property were deducted from any gross profit, along with any rises that coincide with wage increase/inflation (other than property) over time. They could look into mortgage interest being deducted (I believe this is done with CGT on second properties). Then any profit is taxed (like a form of CGT). The tax would be solely on profit due to property price increase.
Our children pay for house price rises above wage inflation. Those that wish for a large rise in house prices to fund their retirement…That’s lovely to ask your children to pay for your retirement as well as theirs.
Should our children wish we (DH and myself) aim on providing our children with very substantial deposits for their first properties. This will be a significant proportion of the average price of a property at the time (this should help with loan to value ratio). If property continues to rise I do not want to be to blame for my children’s huge mortgages/lack of home. We will also be funding them through university-we did not have huge fees (we are in our thirties). We are aware our NHS pensions scheme is underfunded (our children will be making up the shortfall). We are aware our university degrees were funded to the tune of 100’s of thousands by tax payers. I was horrified to see the first flat a brought (in my 20s) has been sold for 150% above what I paid for it.

Read “The Pinch” by David Willets.

It is not a good situation but any government introducing CGT on primary residences would be out PDQ. It would have to be a new government doing it immediately they were elected because as soon as you get settled you're looking out for re-election.

The problem would be tackled far better with a higher CGT charge on second properties and investment properties and perhaps a change in the way rental income is taxed so that its taxed at a higher rate. This would initially potentially increase rents but longer term would reduce the number of people buying investment properties and rents would come down.

However, anecdotally I know of various people who don't pay the proper taxes on their second homes anyway and even some who look shocked when you suggest they should be paying income tax on their rental income and will have to pay CGT when they sell unless its only been a second property for a very short period and they lived in it previously.

Here too though, because of the fact that being in government seems to be far more about being reelected than changing anything, you'd need to rely on a brave government or a new incoming government acting swiftly, otherwise their concern is going to be more about losing voters.

Comes full circle to the younger generation voting and getting more engaged (although having said that, given labour's impossible position between badging themselves as the socialist voice of the people who will spend left right and centre to help those at the bottom, and taking back control of the appalling financial problems they helped to create, we will all probably be screwed, not just the younger generation.)

so when would you pay the cgt? we currently pay a vast amount of income and council tax already - a lot more than we will ever get out of the system. not keen to pay even more on an ongiong basis - and have no control over how much that would be because we can't control our property price. I could see some justification for paying this when you no longer have property (in the main because you die, but then there's death duties anyway; or because you are in a care home, in which case you'd be paying for that).

well i wish you luck with finding the money for tuition fees and house deposits for kids and your own pensions. i guess we are a bit older than you. despite me earning a decent amount and my husband a lot, we know we will never be able to afford all this. plus any inheritance that might have eased things from my mother has gone on care home fees - so for her CGT would have been the least of her problems

Those who earn a lot will always pay in far more than they take out. But there does come a point where people just leave the country and their money then leaves the system.

If we really want house prices to drop then the solutions are much more house building and secondly let interest rates rise to a natural level. If people were paying the 6% or 8% or 12% some of us have paid over the years they would not be able to buy such expensive properties and prices would drop. However never in the last 100 years of British history have house prices dropped and not risen to the level they were before so whenever we have massive crashes which we have had fairly regularly over time even if it takes decades prices then do rise again.

(There is no one supporting CGT on private residences - no party would get elected if that were brought in. By the way on second homes there is no set off of interest against capital gain. Capital and income taxes operate separately. If you made a home from a holiday letting that would be taxed on your income profit - so if you made £5k and paid £2k to the person who manages or cleans the place you are taxed on the £3k profit you made and the same with interest. If you sell it you can only set capital spending against the capital gain and that does not include mortgage interest).

'Part buy - part rent' to me is a double edged sword as on the one hand can mean people can start to buy a house but means owner can let its price creep up to double its worth.

I will get flamed for this I'm sure, but I just don't understand the fuss that gets made by people who rent in London but can't afford to buy. It's simple - if you can't afford to live there, don't live there. I'd like to live in a castle but I can't afford to, so I don't.

And it's not all rosy for people who own houses anyway. I bought a house in 2008 because prices seemed to be going up and up and up and I was worried that if I didn't get a foot on the ladder, I'd never be able to afford to buy. So (unknowingly) I bought when house prices were at their peak and fixed the rate for 5 years because if it had gone up, I'd have been unable to make the repayments. Months later prices and mortgage rates crashed and I was stuck in serious negative equity paying a mortgage off at 7.29% while everyone was paying 0.5%. Then the house needed a new boiler which I had to borrow money to pay for

Renting can be a FAR better option, believe me.

I agree things are hard now for the under 30s because of ridiculous housing costs, poor wages and a lack of decent jobs. However it hasn't been easy street for all people over that age either. People forget the recessions in the 80s and 90s that saw a lot of the older generation lose their houses and jobs. Not everyone had the capital to make money back then and the people who were poor in the 80s and 90s are probably still poor now.
We need to make things better for everyone on low incomes not just the young.

On second properties mortgage interest is tax deductable if buy-to-let. Understandably capital payments are not. Anyway all of this is a variation on CGT-give it a new name. How about a "control house prices for the sake of our children tax ". Actual CGT on second properties I think should be increased. I left multiple home owners off my list above by mistake.

Democracy has its problems-the electorate will frequently vote for what looks best for the now (pocket calculators seem sadly absent from politics). Those in power will always be trying to get re-elected (for example few politicians will advocate doing away with blanket winter fuel allowance, or free transport etc when the older generations are more likely to vote and out number the younger generations). The problem is the rise in funding promises that are untenible especially with an aging population (I have freely admited our NHS pensions scheme will not be fully funded when we retire-presuming myself and DH life to average life expectancy for our circumstances), yes we make the required superannuation contributions. We will still get a final salary pension despite it being underfunded (most likely our children or theirs will have to fill the gap).

We should have no problem fulfilling our financial plans as regard helping our children, it may not be enough though.

The "control house prices for the sake of our children tax grin" would be set at a higher rate than CGT as suddenly mortgage interest would be tax deductable on a primary residence. But if house prices slow down and do not increase that much above wage inflation the tax on "not much" will be even less. I firmly believe controlled growth is best.