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

[00100001]

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??

When we first bought in the early 80's, you could get a mortgage based on 3x the man's salary plus 1x the woman's. Because it was assumed that the woman would give up work to have kids, they didn't allow you borrow any more.

Then prices went up and they had to move the goalposts. It then changed to 3x joint salaries. Then 4x joint.

I believe that they have now changed the term and it no longer has to be over 25 years, but can now be over a longer term, which makes the repayments lower.

My first home was £23,500. It would cost at least ten times that now.

I don't know how ordinary people afford it without help from family/inheritance.

You can get a 40 year mortgage now if you are young enough.

[quote nightwakingmoon]@sst1234 You have it the wrong way round. Wages were suppressed, but by low interest rates. But the low interest rates were designed by central banks to increase asset price speculation. This was driven by the Fed and followed up on by the BoE. (Greenspan and George are on record saying this.) At the time the BoE was independent, and largely followed the Fed in terms of monetary policy, so Blair had nothing to do with it (and in fact is known to be on record as expressing concern over asset price inflation).

Brown, though, ought to have known better. However, this was widespread financial policy across the Anglosphere and the global economy at the time, which was a large part of the problem.

In fact, keeping wage inflation low and stable was not the problem - it would have been a good policy had interest rates remained moderate and lending at normal levels.

The financial crisis of 2008/9 never really went away. The economic imbalances it created are, if anything, more distorted now than then.[/quote]
Keeping wages suppressed is a political choice. You are conflating two different issues to make a different argument. The fed is not to blame for UK wage stagnation, not when US itself has seen wage growth way beyond what this country experienced. Government who subsidize low wages with taxpayer funded welfare, cannot blame central banks for wage stagnation. This is why this country has fallen into a spiral of low skilled, like wage employment.

Are you kidding? Have you been asleep since March 2020 or something? No

The people that do need the most health care are the ones over 70. Most of our healthcare budget is spent on older age care and in the last few years before death. There is a big demographic bulge just about to move into the 75+ age bracket, whose care will be more expensive than any generation in U.K. history.Who’s going to be paying for it? Are you under the impression that the NHS is super flush right now, or that our tax coffers are overflowing with surplus cash?

There’s no way that any party will make over 70s pay for their healthcare. It would be political suicide. Not happening. So no need for anyone to sell their house to pay for it.

The only reason people have to sell their house is to pay for residential care, which only a small proportion needs.

I bought my first house in 1980, two full time wages did not allow a mortgage on the cheapest 2 bed terrace in a not very nice area. We bought one that was being auctioned to highest bidder which was virtually derelict. It took years to do the work needed and get some furniture. When children came along it was second hand prams, cots, clothes before it was trendy and saving the planet! We also lived through mortgage rates of 15% and had to live on very little, definitely no false nails, coffee shops ect. Today's interest rates are miniscule in comparison and I get fed up of hearing how hard it is for youngsters these days when they all have expensive electronics, gym memberships, cars and expect holidays abroad. If a house is what you want you have to forego other things until you can afford it but nobody seems to expect to have to do that anymore🤷

@BulletTrain

You can get a 40 year mortgage now if you are young enough.

But you can see that that is lunacy, right? 40 years servicing mortgage debt? Madness. I note that a poster upthread is rejoicing at her good fortune at having been permitted to borrow a fuckton of cash over 35 years to buy her current house, even with a massive deposit from the growth in value of her first.

Seriously, the lenders must see you coming. Do you know how compound interest works? The longer the term you borrow over, the more the lender makes from you.

I bought at 25 in 2018 with a £100k (33%) deposit. This was from inheritance from my Dad’s death. That’s the only reason I could buy a house.

It’s extremely unlikely to transfer down. By 2035 most boomers will need to be spending most of their houses on health and social care, and to afford this they will be selling their houses into a declining market.

Some will, some won't. Even so, as that population bulge passes demand for housing will reduce a little which should take some of the heat out of the market. Hence reducing prices.

@Iamthewombat

How is a 40 year mortgage any different to later retirement age for state pension? If people are living longer, what do you expect?

There’s no way that any party will make over 70s pay for their healthcare. It would be political suicide. Not happening. So no need for anyone to sell their house to pay for it.

The only reason people have to sell their house is to pay for residential care, which only a small proportion needs.

I’m with @nightwakingmoon on this (and, in fact, on everything else she has posted).

Do you genuinely think that as a huge number of people born after 1945 become elderly, in an era when people are living longer than ever, that they won’t be asked to meet some of their own care costs? I’m not talking about visits to A&E. It’s home visits from carers, home helps for cleaning and housework, elective care and yes, residential care, which more than a small minority will need.

No flipping way is all that going to be met from general taxation. So anyone expecting a nice windfall from baby boomer mums & dads is in for a shock. I’m certainly not expecting anything from my elderly parents: I’d sooner that they spent it all on making their own lives comfortable, and they may not get a choice about that anyway.

@DdraigGoch

It’s extremely unlikely to transfer down. By 2035 most boomers will need to be spending most of their houses on health and social care, and to afford this they will be selling their houses into a declining market.

Some will, some won't. Even so, as that population bulge passes demand for housing will reduce a little which should take some of the heat out of the market. Hence reducing prices.

How does that work? Population would have to reduce in order for that to happen? Or there would need to be a huge house building surge. Why do you think either will happen? The finer can’t, because there will need to be an inward migrating population to keep the ageing population paid for. The latter won’t happen, because, well…where do I even start.

[quote sst1234]@Iamthewombat

How is a 40 year mortgage any different to later retirement age for state pension? If people are living longer, what do you expect?[/quote]
How is it different? Because if you have to wait longer for your state pension, and particularly if your occupational pension is tied to state pension age, as most public sector schemes are, you shouldn’t be spending money that could have gone towards private pension or ISA savings, servicing mortgage debt. If you save privately for retirement, you buy yourself options. You might want to retire before you are 67 (for people my age) or 68 (for people born after 1977). You can’t do that if you are gleefully funnelling all that income to your mortgage lender and thanking them for the privilege.

An extended mortgage is a terrifying waste of money. Especially now that interest rates can’t be held at artificially low levels any more, so that mortgage debt is going to vacuum up a whole lot more of your income over those 40 years.

It’s home visits from carers, home helps for cleaning and housework

None of which will cause people to sell their houses because they’re still living in them and most home owners can pay those costs out of income. Elective care will always be free at the point of delivery for the political reasons I’ve already mentioned. The sole and only reason people sell their house is to fund residential care.

1/ Transfer of parental equity to outwit inheritance tax and thresholds for privately funded care costs.

In the 1980s, places like Blackheath, Wimbledon and Chiswick in London were considered unfashionable and suburban, and were lived in by civil servants, teachers and nurses. All these little terraces and semis are worth £2-4m now; when their owners retire and downsize they give their kids the remaining capital, knowing their final salary public sector pension will be ample for their living expenses. There are literally thousands of these streets all through zones 1-3, so lots of young buyers in their thirties with big cheques burning a hole in their pocket.

2/ Interest rates are still really low even despite the recent increases, and mortgages are longer than the 25 years they used to be. Many people no longer pay attention to the headline cost of a property, and just treat the mortgage as renting from the bank. It’s cheaper than renting in the private rental sector.

3/ Inheriting a council house is like a lottery win if you live in a gentrifying part of London or Oxford or Cambridge; I live in a street full of houses increasingly lived in by bankers and lawyers, that were previously bought at right to buy discount by the incumbent tenants, and then sold on at market value.

4/ Two salaries.

5/ Foreign investment. Sterling has fallen so it’s cheaper to buy if you’re using a foreign currency. The rule of law makes the UK a very attractive second home for foreigners, (even though our own prime minister is currently busy flouting it, like some shitty banana republic). London is a global city and if you have a foreign employer you can even elect to be paid in a different currency that works to your advantage.

my 89 yr old mother is still living on her own. her pension income is enough to fund her own care home needs. she will not need to use the sale of her house to fund it.

@Blossomtoes

It’s home visits from carers, home helps for cleaning and housework

None of which will cause people to sell their houses because they’re still living in them and most home owners can pay those costs out of income. Elective care will always be free at the point of delivery for the political reasons I’ve already mentioned. The sole and only reason people sell their house is to fund residential care.

Ok, keep telling yourself that.

Have you failed to notice the tidal wave of adverts for equity release and ‘lifetime mortgages’ to enable older people to stay in their homes? At a very tidy profit to the lender, naturally.

Where do you think that the money released via such schemes is going? Personal care and elective care, for two. Elective care will not always be free at the point of delivery and actually not all of it is at the moment. many older people want to wait two years for a knee replacement, for example, and will choose to go private. So when the baby boomer generation become elderly, ie 75+, which has already started for the people born in 1945, the value in those houses will 100% be funding care, whether sold during the owner’s lifetime or not.

Haha that should say NOT many older people want to wait two years for a knee replacement!

In the last 20 years, about 7% of the housing stock (over 1.5 million homes - that's about two years worth of residential property sales) has gone from being owner occupied to being rented out.

So a lot of the money that is buying houses is coming from investors. People who, if the property market didn't look so attractive, would have put their money into some other investment. Those investors are leveraging the money they invest by getting mortgages against the property (like most buyers do), so a lot of the money is still coming from financial institutions.

@00100001

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??

It's a combination of

-two incomes per household rather than one, and

• the accumulated equity off the last generation passed on down to the next.

@Seashor

My son has just bought a house with his girlfriend. 70 thousand deposit. They worked their arses off, didn’t spend on false nails, hair, etc. They lived at home and they didn’t decide to have children and then bleat on about how the ‘Boomers’ had it so easy. They didn’t! They were also prepared to move to a cheaper area.

So they had parental help, then?

Lots of people don't have the option to live at home rent free to save for a deposit.

I think the 2 salaries, low interest rates, and adults living at home to save are the main of it.

When you are young and used to living on 3000 (food, bills) or so £ a year straight out of uni; then you are used to a frugal lifestyle.

If you keep this mentality and go home to live rent free then as a couple you can save an incredible amount, incredibly quickly.

c. 30k a year for a couple on near MW is not actually that difficult if you dont go on holiday, dont have a finance car.

So the bottom end of the market is getting a boost naturally. Mid level of the market is rising because there are so few suitable family homes; and to get what you want you have to pay over the odds.

Recent spikes have also been added to by people saving small fortunes on child care fees during covid; as well as londoners moving out and buying properties from cheaper areas with higher deposits.

@Iamthewombat : Private knee replacement = £11,500 - £12,500 , excluding post op physiotherapy.
Just priced it for DH.
I've suggested a mobility scooter instead!!! - He is pain-free, I'm not completely heartless.

I do think the government needs to tackle the foreign investment in properties issue especially in London. There are streets near me that are practically empty or bought as rentals by overseas investors. They've switched from the luxury market to the mid range family homes and are buying more units at a time. So they're taking family homes out of the market creating a housing shortage & a price increase.

I've put my house up for sale and already I've had 3 offers from investors which I've turned down. I want my house to go to a family or couple so I'm prepared to wait. The investors have offered around £25k cash under the market value for a quick sale. They will spend £10k max and then sell it on for an inflated price or let it out.

We bought with zero parental help as they can't afford it, and neither set of our parents own property so couldn't release equity. As I've always been aware that I would never have financial help in buying a property I've saved a bit from every job since I was 14 because growing up with the uncertainty of renting was horrible. Obviously at that age it was like a tenner a month, but even during university I worked myself ragged in 2 jobs so I could save a little bit. When I graduated I didn't secure a grad type job straight away so worked several jobs whilst in a disgusting house share- I did go out etc but was frugal. Once I got a better job I saved more and did overtime and unsocial hours to try and maximise my earnings, I managed to save a fair bit but yes there were sacrifices. When I met DH he didn't have much savings but as we became more serious he started to be more careful with money so he saved and did extra work where he could. Our combined wages aren't overly high but we both earn above the national average, we moved to a less desirable area and compromised on a few things to get a reasonably priced house. Now I've retrained we could get a higher mortgage but we are okay where we are and don't see the point in stretching ourselves.

@NumberTheory Apparently lots of banks are becoming landlords:

www.reallymoving.com/blog/october-2021/what-does-banks-buying-properties-to-rent-out-mean-for-first-time-buyers