To wonder where the money is coming from to buy houses?

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So, if houses used to be (say) 4-5x average annual salary back in the olden days of the boomers.

And now house prices are 10 X average salary... Bit they're still being bought, and people want to buy...

Where is this money coming from?

Are boomer parents artificially inflating house prices by giving huge sums of money by releasing equity etc?

Who is buying the expensive houses??

I've wondered this for years.

We're mid 40s had to wait till early 30s to buy and it took huge amount of sacrifice hard saving, lucky and planning getting to a place we could afford only to have prices drop couple of years after buying and first house to cost a fortune as nothing had been done to it for years - so for less than we paid for it. It's only with second house we've got on an even keel.

We didn't have parental handouts becuase they weren't in a position to give us any - and I was by time I was an adult priced out of bit of midlands I grew up in and large swaths of the country.

We can't afford to live in the city DH works in - so he has a long commute. Even here prices have risen since we bought as we wouldn't be able to buy this house now.

There are parts of the UK where property prices are still affordable but I have to wonder if there will be any left by time our kids are needing to buy and if they'll be able to match jobs and locations or at least manage long commutes like we managed.

Not sure if I'm a baby boomer as born in 61 but only have 2 years of mortgage left to pay. I have been passing on money/help to my children whilst I'm still alive and can see them benefit. I have helped dd out with extortionate nursery fees so she can go back to work full time twice. I helped DS with giving him £8.5k deposit and now with youngest son we are going to sell a btl to him for less than we bought it for 15 years ago so he will have the equity in it and can therefore afford to pay mortgage on it. We will have to pay approximately £28k capital gains and pay of small mortgage but it seems pointless him having to live at home saving £7k a year when house prices are going up £10k each year or more. I will be adjusting my will to make sure he gets a little less in our will.

First house - saved for 12 years for deposit.
Second house - saved for 9 years for deposit plus selling the first house.

No one had to die.

@Iamthewombat

The OP is correct. If all parents in a position to inject cash from the bank of mum and dad took a stand and said no, we’re not going to feed insane house prices by giving our children big deposits to ‘get ahead of the game’, then less money would be chasing the same assets and prices would have to come down.

But that would require all parents to make the same sensible decision, wouldn’t it? And to take a long term view for the common good.

The same people sending their children to private school for a perceived advantage over every other child or move into OFSTED outstanding areas pushing the house prices up and again quashing any chance of equality or levelling up.

I am in no way deliberately being insensitive but I am confused when people mention a parent had to die for them to receive their inheritance/house. Those who do not receive inheritances also suffer the loss of parents and have to go through a grieving process.

@caringcarer

Not sure if I'm a baby boomer as born in 61 but only have 2 years of mortgage left to pay. I have been passing on money/help to my children whilst I'm still alive and can see them benefit. I have helped dd out with extortionate nursery fees so she can go back to work full time twice. I helped DS with giving him £8.5k deposit and now with youngest son we are going to sell a btl to him for less than we bought it for 15 years ago so he will have the equity in it and can therefore afford to pay mortgage on it. We will have to pay approximately £28k capital gains and pay of small mortgage but it seems pointless him having to live at home saving £7k a year when house prices are going up £10k each year or more. I will be adjusting my will to make sure he gets a little less in our will.

Yes, you are in the baby boomer cohort but you’re only 61 or 62. Not sure why you write as if you are 91 I have been passing on money/help to my children whilst I'm still alive and can see them benefit

How will you have capital gains tax to pay if you are selling your buy to let house to your son for less than you bought it for? You pay CGT on gains. Not proceeds.

Are nursery fees ‘extortionate’? How much do you think nursery should cost? Should the staff work for free?

@Iamthewombat

How will you have capital gains tax to pay if you are selling your buy to let house to your son for less than you bought it for? You pay CGT on gains. Not proceeds.

CGT is on market value, not actual value, when selling an asset to a connected person.

Yes, but the PP isn’t going to admit that when she sells to her son, is she? And I bet she doesn’t know that rule either. I think that she just doesn’t understand how capital gains work.

@Iamthewombat

Yes, but the PP isn’t going to admit that when she sells to her son, is she? And I bet she doesn’t know that rule either. I think that she just doesn’t understand how capital gains work.

You don’t get a lot of choice in the matter when you apply for the mortgage it’s a concessionary mortgage so the deposit is being gifted out of money that actually in theory doesn’t exist because it’s on paper equity, the result HMRC insist on a valuation and that’s the number the tax you on. So basically you pay capital gains tax on money that doesn’t exist I mean you’ve got to admire the system really.

The Bank of M&D certainly has an impact.

"In 2020, gifts from parents, grandparents, friends and relatives were behind more than half of house purchases among the under-35s, according to a study by Legal & General"

I am Gen X and would say that those who left University and got well paid jobs could easily afford to buy a flat in London by their late 20s.

Quite a few of my friends got inheritances from GPs.

Whereas Millennials need a very well paid job, a partner with a well paid job and some help from their baby boomer parents (either through living at home rent free to save or through a lump sum gift) to be able to buy in their early 30s.

I am very suspicious of those who claim they got a hefty deposit by shunning false nails and avocados.

It obliterates the logic that in order to save, you need:

a) money
b) lower outgoings

Not denying of course, the power of an avocado.

Mrsbaubles
On average gel nails/extensions cost £30/£40 every few weeks. Just over £1000 a year. £10,000 in a decade which would barely touch the sides. I can imagine many women would think "fuck it, I will never be able to save enough for a deposit, let me do the small things that will bring me joy/pleasure"

There is no benefit to scrimping and suffering if it does not pay off in the long run. There are simply some things that are out of reach for many, no matter how much they cut back.

The whole avocado and nails thing is just another way for well-off people to bash others.

The first person who brought it up here boasted that they saved for a mortgage "without help" --except for living rent-free with mummy and daddy.

A lot of people can't easily live with parents anyway as it might not be where their workplace is, DS didn't come back home after university and got his job in the city where he was, he carried on house sharing, did his part time supermarket job full time whilst applying for accounting jobs.

We were literally told years ago by my DHs moderately well off parents that "you'll be getting nothing." Nothing. We hadn't even asked! They're completely disinterested in us or their grandchildren despite having had lots of help themselves when they were raising their own children.

Unfortunately I have inlaws that genuinely think they are doing us a favour by 'toughening us up' by not giving us any support whatsoever despite getting it from their own parents. Hey ho.. shan't miss them when they're gone!

Hmmm yes and no, the avocado trope is boring

BUT

In the 90s, earning £850 a month (DH a bit more) with 70% of our joint income going on rent, we still saved £200 a month for 5 yrs, we did not eat out, go on holidays, or do nails etc

It was a very frugal existence, and hard to do, but it saved us the deposit for a flat after 5yrs, and after that we started earning more and paying less and having more fun

But she 25-30 was just work and frugal fun (pic nice with friends, drinking cheap wine in the park sort of stuff.

Yes we were lucky that flats were affordable (95k for a 1 bed flat in East End) and yes I don’t begrudge young people their lifestyles, and yes I think house prices now are insane….. BUT, young people are definitely more about enjoying the moment and not taking the long view in terms of finances

I think

I do also agree, that not buying an avocado won't make a difference. I think that, also, yes , some people want to be able to spend in whatever they want, and still magic up money for a house. So some people will (for example) have weekly takeaways, have multiple streaming subscriptions, have a slightly fancier car on finance, go out with friends every week etc etc

Perhaps the lifestyle of people and their expectations of what life "should" be.

But then, life is too short not to celebrate a friend's birthday, or have fish and chips on occasion.

Perhaps there's a happy medium.

So, if houses used to be (say) 4-5x average annual salary back in the olden days of the boomers.

Are you having a laugh? I bought my first house in 1979 and we got 2x husband and 1/4 of mine!!

The house prices started rocketing when banks started lend 4x or 5x salary.

@whywouldntyou

So, if houses used to be (say) 4-5x average annual salary back in the olden days of the boomers.

Are you having a laugh? I bought my first house in 1979 and we got 2x husband and 1/4 of mine!!

The house prices started rocketing when banks started lend 4x or 5x salary.

I agree. When we got our mortgage it was 3 times the higher salary or 2 times joint salary. We had to save/wait for an extra year to get the deposit high enough to bridge the gap.

It's basic economics - people will spend more if they can, hence prices rise.

Whereas Millennials need a very well paid job, a partner with a well paid job and some help from their baby boomer parents (either through living at home rent free to save or through a lump sum gift) to be able to buy in their early 30s

Or lots of help with free childcare! My parents aren't in a position to help with a deposit but DM probably saves us £600pcm in nursery fees.

Oops missed a sentence at the end.

I was going to say it makes it hard for us to move somewhere cheaper, deposits would be lower but we wouldn't be able to save as much as all our money would go to nursery instead.

The issue is that high prices are really bad for the economy because if people need to stay in and not buy avocados that means the avocado Pharma Carl and a living if people can’t get their nails done once a month and they save themselves two grand a year in that process that’s two grand a year that isn’t going into the nail technicians pocket it’s 20% of which isn’t going into the tax coffers and the nail technician isn’t buying a house any time soon there’s nothing good about high house prices.

@PuttingOutFires

My husband and I losing all 4 of out parents by the time we were 32.

I'd swap the house for some grandparents for our kids 😔

We were a little older than you and your DH, but sympathies as we are in the same position - lovely big house due to inheritance, but no grandparents for our DC, or (non-financial) parental support for us.

@Lovinglife45

I am in no way deliberately being insensitive but I am confused when people mention a parent had to die for them to receive their inheritance/house. Those who do not receive inheritances also suffer the loss of parents and have to go through a grieving process.

Most of my peers still have both parents alive, and likely won't inherit until their late 50s, or even 60s. In my case at least the reason we can afford a big house at our age that is disproportionate to our salaries (which is the subject of the OP) is because both me and my husband's parents died relatively young. It's not that confusing to grasp that point in relation to the topic of this thread is it?

I’m not sure really…I do think twenty-somethings now do have a higher standard of living when it comes to ‘treats’ and seem to have more of a sense of entitlement around this. All the twenty somethings I know will buy makeup like Charlotte tilbury whereas when I’ll have bought brands like Rimell and Maybelline at their age. Stuff like meals out, hair extensions, botox/fillers, holidays abroad etc all seem pretty common place for today’s younger adults so it’s no wonder some cannot afford a mortgage.
I think as well house sharing seems to have gone out of the window. Young adults seem to either live with their parents, rent alone or with a partner or buys. Sharing with friends or a house share a la Spareroom.com doesn’t seem to be as much of a thing any more?