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

Somewhat ironic though perhaps iggly?

The general gist of your posts has been how selfish those baby boomers are, taking everything they're offered to the detriment of the youngsters. But then you say you and your DH have public sector final salary pensions which you know will be underfunded but you are still members of the scheme and will take out more than there is available and the younger generation will pick up the tab.

I can't blame you, because most people will take what they are offered and will not say "oh no thanks, it wouldn't be good for the younger generation so I'll turn down that money thank you" but it is ironic.

Life is not black and white. Life is not "fair".

I am honest. Most public sector workers do not look into the maths and claim their pensions are self funding. I go all the way into detailed economic reports and check out the somewhat optimistic projections.

As for annuity rates offered for private sector workers they are currently ridiculously low.

iggy - don't forget mortgage interest varies considerably depending on how old your mortgage is - we have relatively little interest now as we are paying off the actual amount borrowed. this means our tax would be high, especially since our house is expensive now.

And you might say that is fare. But remember in the 80's i was applying for management jobs with 80 applicants per job, we had 15% interest rates and a property that was worth 25% less than we had paid for it and were being threatened with repossession despite working our guts out in highly paid stressful jobs and buying absolutely nothing that wasn't essential

DoS You would not be taxed on mortgage interest from the scenario I strung together. If the property was sold when it was worth less than when you brought you would have no tax to pay in any scenario.

Infact I am maybe more worried about the pension/healthcare cost growth and I have kept trying to mention pension issues in my posts. Currently we are very much living for today and not tommorrow as a nation. This is understandable as it is how modern politics works. This is how a lot of the west does politics. Bare in mind as housing costs rise so does eg housing benefit as well.

Record keeping would be a pain though . Those mortgage annual statements would be essential keepsakes!

how would you account for people improving their homes? Presumably a lot of record keeping there too.

I'm prepared for a flaming here, but I have to give my experience...
There are houses available for £15k in Burnley, Nelson, Colne etc. Some go for £10k. If you want a nicer house, £40k will buy you a house within commutable distance from Manchester, Leeds or Bradford. £50k will get you a garden too.
I am 34 and mortgage free as I bought a low-priced house that I can afford.
I have always had low-paid jobs, but paid off my mortgage over 10 years and I now have a nice house in a very nice area with a large garden that I love.
People tell me I'm lucky and that they cannot afford to buy, but they can. Anyone with a job and a good credit rating can buy a lower priced house. There are houses for £40k all over the North and in Wales.

I think it is a case of lowering expectations, tbh. If I was under 30, I wouldn't expect to be able to afford a house in the area that I wanted. It's simply not true that these people cannot afford to buy - they just can't afford what they want.

I am from the South, btw, so I also disagree with people saying they cannot move area to buy a house. It was a choice I made for a better life.

AfterAll that's perfectly true. There are decent houses round here (large expensive city) for 80k - 2 bed ex council semis maybe 6 miles from the centre. But people want to live in the city, or my favourite is the usual story you see in the local rag, a young couple in their twenties with quite low paid jobs, or only one low paid job between them, 2 children, looking miserable outside a new build 4 bed detached and a story about how they can't afford a family home.

Some people also won't countenance a house that isn't at least 3 bedrooms and perfect. They wouldn't look at the one bed flat DH and I bought in our twenties in poor condition and redecorated.

If CGT was increased on second homes and buy to lets, all I expect would happen is that people would set up small companies and buy them through those instead, exploiting various company law tax exemptions instead.

I hardly think taxing today's generation even more on their own homes, in addition to making them pay more for pensions, tuition fees, students loans, work in unpaid internships, etc is exactly going to solve the problem. It would make it far worse. Imagine them looking at previous generations and thinking you got all this for free and we don't and we have to pay far more tax than you as well - do you actually want to make people's lives a total misery?

iggy - i understood that it wouldn't be taxied on mortgage interest. My point was that as you come towards the end of a mortgage you are paying very little interest and mainly paying capital off. so your cgt would be comparitely high as you wouldn't be able to offset the interest charges against your cgt payments.

some of the suggestions sound a bit like living in a comunist state to me, which wouldn't be my cup of tea,

after - i've made that point already and agree with you. Houses where my IL's live cost about the same as the flat i bought 25 years ago - so you can't necessarily say people have things harder now - it depends on the area

There is no way any tax change would allow interest deductions from CGT. That is not how taxes work. There is a massive massive divide between capital and income taxes. You have a separate annual allowance for capital gains and a separate one for income tax. You have never in 100 years been able to set an income expense (interest) against a capital expenditure. There will not rewrite the whole of tax law and its fundamentals to muddle income and capital expenses as set offs against capital gains. Now of course they could introduce MIRAS - the US has it and the UK had it about 30 years ago - setting your mortgage interest against your tax. I doubt they will and interest rates are quite low anyway but that would be the only way to do it.

They could reintroduce indexation of capital gains - taxed on the gain after linflation which was fair and worked for decades until they got rid of it.

After should not be flamed. You can buy cheaply in the UK but entitled people who want it all insist they are not prepared to live in XYZ. My daughter bought a £330k one bed flat in London. You can get a whole freehold small terraced house with garden where I live for that ( outer London). Similarly here is a house for £65k I think very near the house my mother lived in www.rightmove.co.uk/property-for-sale/property-43521692.html. I am not saying London is as cheap as that but there are plenty of rather run down seaside resorts even in the South with fairly cheap property. Most of us who have bought properties started with massive sacrifice and not very nice places and worked very hard to get what we now have. Some younger people instead think we were handed it all on a plate and aren't prepared to make the sacrifices we made or indeed our parents made in their day.

Jam tomorrow is my key phrase. If you can have a tough hard time now with no holidays, meals out, no alcohol etc you tend to get your reward later. Suffer now and life can be good in future. If you won't do the suffering now part then you deserve never to buy a house and it's your choice. It's a tough world out there and always has been.
The post above about the negative equity etc was similar to us at various stages - huge property crashes, mortgages higher than value of homes, 12% interest rates. It was not a wonderful easy past it was pretty tough. Now is tough too. life is tough. The best thing you can teach your children is stoicism and hard work, not crumbling under pressure, being tougher than everyone else - just as important as good exam results.

Agreed Greengrow and the ECB has also pressurised for measures from several Eurozone countries to encourage price stability by specifically targeting the ending of mortgage interest tax relief on main residences in some Eurozone members. Now I know the UK isn't in the Eurozone but its telling I think that some Eurozone countries are only looking at ending mortgage interest tax relief on main residences - taxing capital gains on main residences would put the UK out on its own and make it just about the most punitively taxed country in the world, more so than even Sweden.

Agreed also that many of the people who complain about high house prices want 4 bedroom detached new builds as ftbs, not studio or one bedroom flats or terraced older houses. Also, surely when you are late teens/early twenties, you sort of think to yourself, "right what to I want to achieve, and how will I get it?" A lot of people who complain about unaffordability of housing do seem to think they have the right to work in a field they find "enjoyable" (is that even possible 100% of the time?), and to be able to live in a very specific, often rather expensive area, rather than relocate for work like many of their family probably did before them. I do find that a strangely aristocratic notion.

People with buy to let are perfectly capable of dealing with income tax allowances for maintenance, interest and other expenditure. Home owners can do likewise (receipts/guarantees for damp proof courses, subsidence work, wood worm treatment etc are often stored with property deeds). Likewise mortgage summaries contain details on interest and capital repayments. Tax relief on interest would ideally be counted on sale of property for a primary residence (suddenly getting tax rellief on interest payments may lead to a property price rise at the start). Profit due to house price rise above wage inflation and taking into account expenditure sould be taxed as are (ideally) profits on other income sources. Unfortunately there seems to be a cultural belief in houses for profit in the UK, yet horror at the idea of it being taxed. We already get our income and then frequently pay 20% VAT on purchases made with already taxed income-this is accepted. As regards taxation rules do change.

Investment in stocks/shares/bonds etc adds to economic growth. Infact this is a sounder investment if conducted longterm and accross a broad spectrum of companies (eg across the FTSE 100) compared to house price rise. Lower house prices would enable money to go into other investments that really benefit the economy. Bear in mind the next generations pay for any rise in house prices above wage inflation (your profit is from your childrens increased mortgages). A rise in property prices is very insular (there maybe some money coming in from foreign buyers but if they later sell the properties at a profit, that money will be taken directly out of the UK) it can be likened to a long term borrowing of money from future generations, it is very poor way of bringing money into the UK. House price rises will also bring more owners past inheritance tax threshold when they aim to pass on anything to their relatives/friends. High interest rates when coinciding with wage inflation works to wipe out debt. Eg a 40,000 debt in one decade would be the equivalent of a 20,000 debt a decade after high inflation.

Myself and DH already own a substantial family house (brought before either of us were 30). We have worked very hard to be able to do so (as do lots of people who cannot afford to own a property) we are very lucky to be in this situation (no great tuition fees to pay either), we worked our way up and moved through properties (few people I know expected, or brought straight into, a large family home), we were happy to move for work (actually this is more common now), we clearly believe in education and a meritocracy (6 degrees between DH and myself, we invest a lot in private schooling for DS). We are not thinking of profit for ourselves (and continued property growth for a subsequent 50+ years would do us very nicely financially).

Forgot to mention the real problems: of pension funding and increased childcare costs (high qualifications required by carers and reduced ratios of children:carer), increased healthcare costs, national debt.

so iggly - what would take priority for my mum - CGT, care home fees or death duties - she is expected to pay all 3 in a very short timescale.....though i guess its death duties that wont happen as the other 2 will have used up all her money from her house sale anyway.

iggly2 are you actually suggesting that mortgage interest tax relief be introduced so as to fund CGT on main residences?

What a muddle. How much do you think that would cost to collect? And why on earth would it lead to lower house prices, since the ECB has required the Dutch Government to remove mortgage interest tax relief from main residences, as it considers it one of the main causes of exactly the same problem in The Netherlands - too high house prices, leading to price instability in the Eurozone. I know the UK isn't in the Eurozone, but having got rid of mortgage interest tax relief, reintroducing it to fuel CGT seems utterly pointless.

thechandler - i thought she was saying that costs, including mortgage interest, would be taken into account when the cgt is set - in the same way it is with buy to let property and cgt.

i keep explaining to her thats ok when you are younger but no good when you are older as you hardly pay any interest at that stage....but am struggling to explain this as i'm obviously not making it clear

Mortgage interest is not taken account of against your capital gain on buy to lets. There are two ways people are taxed - income taxes on income such as wages, rents, interest on savings, tax on dividends and totally separately capital gains tax on capital gains you make such as if you make a profit on sale of a horse, gold, shares, buy to let, car etc.

Income costs are set against income and capital costs against income.

So if you paid £10k to buy the shares and sell them for £20k you can set against that £10k profit any capital costs such as acquisition costs of the shares but not anything which is an income cost. It is the same with buy to let. If you borrow to buy the interest (but not capital repayments) is one of your many costs and that can only be set against the rent i.e. income. When you come to sell you pay usually 28% capital gains tax against the increase in value but there is no set off for interest paid. You can however set off capital costs such as the solicitor costs you paid out when selling the place.

Anyway CGT on private residences is very unlikely to be introduced so I don't think people need to worry about that. As for advice to under 30s and our children that remains the same as 30 and 50 years ago -0 work hard at school, pass exams well which most people cannot pass, pick a high paid career which most people are not able to pass the exams for so your skills are rare and then work very hard, making sacrifices now so you have your jam later. That will certainly help the under 30s. On the other hand some people are more than happy not to work very hard or want to pursue low paid work or give up work and that will not necessarily lead to a less happy life. These are all valid choices.