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??

@swissmummy12345

Because the baby boomer generation are beginning to die? In the next 10-15 years there will be the greatest transfer of wealth in history. Up to £5.5 trillion in the UK alone will transfer from those born between 1945 - 1965 down to younger generations. 2035 is predicted to be the peak year.

This exactly

Will be so much wealth trickling down over the next couple of years

PIL gave us a deposit. They did the same for their other two children. They’ve lived fairly frugally but not excessively so. FIL was a middle manager type position. MIL worked part time. They were able to accumulate enough wealth to a) retire at 55 and b) give 3 kids deposits on houses. It was a different time.

We bought three years ago and our deposit was a combination of money we’d inherited and our savings. We got a 5% mortgage via a broker on a relatively good deal.

@JudgeRindersMinder

Yeah, but they had help being able to stay at home to save the 70k deposit

Only on mn is helping your kids seen as a bad thing. Meanwhile in the rest of the world it’s just what parents do

Absolutely no one is saying it's a "bad thing". I take issue with the smug posters saying that their adult children got "No help" whilst they were actually being heavily subsidised!

My parents would've laughed in my face if I'd asked to live "at home," ie, in their house, as a young adult. I'm not saying they were right, but that's the reality for a lot of people.

Where is this money coming from?

I'd say first there's a huge landlord class. Often in a medium sized UK town there may be a dozen or so landlords owning literally 100s of properties. It's a "virtuous" cycle of rent paying mortgage after mortgage after mortgage.

Second, as you've alluded to, the vast majority now need TWO incomes to pay these inflated prices as opposed to ONE. In effect, the actual quality of living measured as free time/family time VERSUS time sold to an employer is getting worse across much of the West and has been falling for decades. Post WW2 generations may also have been poor at the end of the month, but at least they didn't need to outsource childcare to strangers. We are barely at home and yet are no the richer for it.

Who benefits most? The company/business owners who have an unlimited cheap labour supply and the big landlords.

@OmgIThinkILikeYou

We used help to buy on a tiny house 6 years ago, only needed 6k deposit which we were able to save as didn't have a child. Then when we had a child, the house was too small so we sold it and did another h2b on a larger property using the modest equity we had. We will remortgage in 3 years and absorb the h2b loan.

I don't know why more people don't use this scheme, it's enabled us to get on the property ladder, sure we have had to live I'm new builds but beggars can't be choosers!

The issue now is that H2B has been used by the government to artificially inflate and prop up the housing/ new build market and people are buying houses they wouldnt be able to get the full mortgage for. Nice until the cost of basic living soars and suddenly those people have to find the money to pay it back. We are talking 100s of £ per month once the repayments kick in.

Most of it comes from the future in the form of the mortgage. If a house costs 300k, you "only" need to save 30k. That's a lot of money but not unattainable for joint middle income earners, especially with a bit of help from mum and dad (whether living with them rent-free or a lump sum).

@Handsnotwands

PIL gave us a deposit. They did the same for their other two children. They’ve lived fairly frugally but not excessively so. FIL was a middle manager type position. MIL worked part time. They were able to accumulate enough wealth to a) retire at 55 and b) give 3 kids deposits on houses. It was a different time.

Not for all of us. DH was self employed, he earned enough to buy our first home on his income alone. By then we had the DC. As his health failed he had to give up, and only found low paid, mainly part time work afterwards. A huge impact on our income.

I had a full time job, made redundant at 50, then again at 60. We moved to a cheaper home so no mortgage in retirement. However, both DC have lovely large homes, neither bought til they were 30+, with no parental help. Very proud of them both.

I think they are maxing themselves out . I know people who have got the max mortgage and loans to be able to move . Not sure how they sleep at night tbh !

We rented a flat but were able to put money away every month, about a couple hundred.
Saved 7-8k doing this, in laws helped with the rest and we used help to buy so only 5% deposit needed.

We could have saved all the money up ourselves and waited a bit longer, but spotted a house in a good area being built with the help to buy option. It was hard not to snatch up and in laws agreed as most other houses were out of our budget.

Now its paying off as our new house has gone up by 60k in value, and our wages have gone up too. So when we sell it we will be able to get a much nicer house without help to buy attached.

It did feel very much at the time impossible to get a house. We were lucky we were able to save up as our rent was affordable, but we have friends in the same situation who can't and are approaching their 30s now.

Put it this way uk average salary in the 70s ish = 22k ish in todays money in 2020s 25k not much change over 50 years banks also don't take risks now

It’s all debt. Previously people borrowed less, paid it off quicker and either moved up the ladder or spent on holidays and other nice stuff. Nowadays they never pay it off, they’re paying interest on a huge mortgage for the rest of their life. The banks profit and so does the economy because people can never afford to retire.

The issue now is that H2B has been used by the government to artificially inflate and prop up the housing/ new build market and people are buying houses they wouldnt be able to get the full mortgage for.
Nice until the cost of basic living soars and suddenly those people have to find the money to pay it back.
We are talking 100s of £ per month once the repayments kick in

Then surely you just sell up when approaching 5 years and use the equity as a deposit on a house you can afford? When we got to near the 5 year mark, we had a meeting with mortgage advisor, we could have got a new mortgage to cover the original loan but we wanted to move to a bigger house so decided to go down h2b route again. When we come up to the end, we will probably sell this house then move to an older property. No massive monthly fees but will likely have a nice deposit based on the equity from this house.

I live in the south east. For a 3 bed semi you’re looking at upwards of 450k. That’s a lot of money to be a FTB. My kids will get a leg up the housing ladder through grandparents inheritance. They bought their house in North London for 30k ish and it’s now worth over £1 million. They have 3 sons and only one doesn’t own a property so far and the other 2 will use that money to help their children buy in London. Their dad has also been working overseas and has saved for their Uni. Very lucky, sadly my parents weren’t in a position to do that; and I think it was different times back then. My parents wouldn’t have even considered giving their inheritance to us instead of having the money for themselves and rightly so really. But I grew up in a very cheap area and you can still buy a house there for 150k

We've lived for so long hearing about austerity bullshit from this government that we've been brainwashed into thinking we live in a country with no money. We don't. The UK is a rich country with plenty of money sloshing around. At the top. Where it firmly stays and gets bigger.

If you are at the top, finding cash for deposits, fees etc is easily come by. There are a large number of high earners too, who can get stupidly large mortgages to buy these expensive places.

And for those lucky bastards (like me) who are older and started ages ago, it's just incremental spend , so more easily achieved. That said it's getting harder - when we went from flat to house 18 years ago, price difference was c £100k, it's now £400k difference (london, obvs) .

house shortages and prices will stay as they are until the government chooses to stop letting foreign investors to buy what they want and then leave empty , and to put much stronger rent controls and housing quality legislation and enforcement in place. It can be done but they just don't give a shit.

The attitude seems to be 'I'm alright Jack', and that housing is not a basic human right. It is a basic human need and right, and in such a rich county frankly it's a disgrace that we have such poor, expensive housing. We can do better but we keep electing politicians who just don't care about us.

Because the baby boomer generation are beginning to die? In the next 10-15 years there will be the greatest transfer of wealth in history. Up to £5.5 trillion in the UK alone will transfer from those born between 1945 - 1965 down to younger generations. 2035 is predicted to be the peak year.

That's an interesting point Swiss, ** I have also wondered if sadly covid deaths have brought about a lot of early inheritance to people as well.

Those saying young people can afford houses if they save and stretch themselves - what you don’t realise is that if they stretch too far to afford their first house they can never move further up the ladder.

Personally I will NEVER pay off my first mortgage. It took me so long to save up that I couldn’t buy a house till I was in my 30s, which only leaves me about 35 years to pay it off. If I’d been able to buy at age 20 I’d have had more like 50 years to pay it off. And it’s such a huge sum too. I will never be able to move up the ladder to a bigger or better house - I won’t even be able to pay off this starter home by the time I’m 70.

@catwomando

We've lived for so long hearing about austerity bullshit from this government that we've been brainwashed into thinking we live in a country with no money. We don't. The UK is a rich country with plenty of money sloshing around. At the top. Where it firmly stays and gets bigger.

If you are at the top, finding cash for deposits, fees etc is easily come by. There are a large number of high earners too, who can get stupidly large mortgages to buy these expensive places.

And for those lucky bastards (like me) who are older and started ages ago, it's just incremental spend , so more easily achieved. That said it's getting harder - when we went from flat to house 18 years ago, price difference was c £100k, it's now £400k difference (london, obvs) .

house shortages and prices will stay as they are until the government chooses to stop letting foreign investors to buy what they want and then leave empty , and to put much stronger rent controls and housing quality legislation and enforcement in place. It can be done but they just don't give a shit.

The attitude seems to be 'I'm alright Jack', and that housing is not a basic human right. It is a basic human need and right, and in such a rich county frankly it's a disgrace that we have such poor, expensive housing. We can do better but we keep electing politicians who just don't care about us.

What’s all that got to do with austerity? Do you want government to pay people’s mortgages?

The only person I know who "bought" houses never really did, they were still paying the mortgage and calculated that into the sale so the money got from the previous one finishes off paying the mortgage on it and leaves them with enough to buy and start the mortgage on the next, so they never actually buy a house just constantly paying mortgages.

I dont know if a lot of people do that, I live in London anyway we are full of god awful over priced towers that are bought up by foreign investors from China, Russia, SA etc.

the chinese I can understand as if they didnt put their money into property it has to go into the state run bank and the CCP can take all your money at a moments notice over any crime against the state, so the chinese desperately buy and sell property first in their own country and then the world when they have enough to, just to keep their money away from the ccp.

We lived in a two-up-two-down for WAY too long with 2 kids who shared a room.

If it were council accommodation, we would have been told to stop making them share long before that. But we felt like overpaying on our tiny mortgage was a faster way to boost our deposit than to save in the bank.

Eventually we sold said two-up-two-down for £200,000. It meant we'd almost doubled our money on the house in just 12 years. 😦)

I still remember the day all the estate agents came around to value it and we'd estimated £170,000 but they all told us £210,000. We had to have a sit down and I even cried!

We bought something much bigger but ramshackle. Now all the kids have their own rooms... but everybody's room has at least 1 hole in the wall or roof! 🤦🏻‍♀️😅

Anyway, that's how we have afforded a suitably sized house.

The people that bought our old house were very young FTB with a decent (20%) deposit. We had no idea how the hell they'd managed it. At their age, I'm not even sure they'd like avocado...

Just an interesting statistic. I was told on Friday our market town had enjoyed a 20% growth on property values in 2020 & 2021.
It is not by the sea but an hours train journey from London. Add in a scarcity of property due to the stamp duty holiday (bung) and everything is snapped up within days. We have been gazumped more then once.
We had a 100% mortgage in the 1980s and also suffered losing our home in 2009.
We have paid over £300, 000 in rent. We are going back into property ownership due to hard saved pension funds.

It's certainly more difficult for the ever increasing numbers going to Uni as they don't get the chance to start earning/saving until at least aged 21.

If they entered the workplace at 16 or 18 (like most did in previous generations) they'd have had the chance to start earning and saving at a much younger age.

As it is, Uni students have to work to pay their ruinously expensive accommodation costs, buying books, meals etc as maintenance loans often are nowhere near enough these days,

That's a lot different from previous generations who got jobs earlier, lived at home longer, so could save whilst giving a notional "rent" to their parents towards food etc.

Graduate starting salaries haven't kept up with inflation nor general pay increase rates over the past decade or two, so even when they finally get jobs, they're often on very low wages in the early years of their career, meaning they don't actually start earning decent money until mid to late 20's.

Blair's push to increase university attendance really wasn't thought out properly for so many reasons.

Then surely you just sell up when approaching 5 years and use the equity as a deposit on a house you can afford?
To be clear Im not talking about buying mansions just a 2/3 bed.
How many people downsize at the 5 year mark?
None usually as thats when they are starting families.
My comments were also based around whats happening now with living costs about to soar dramatically and H2B loans payments kicking in.

They bought their house in North London for 30k ish and it’s now worth over £1 million.

... Another aspect of this is how it skews the landscape on terms of meritocracy. Basically making it even worse than it is already. Millions of kids today will be millionaires for life, not because of anything they achieved, or even anything their parents/g.parents achieved - but because their parents or grandparents bought a cheapish house in London/South East in the 80s or 90s which is now worth 20x what they originally paid.

@Viviennemary

I have wondered the same. Those very very low interest rates have encouraged more borrowing and caused house price inflation.,

There's a lot of truth in that.

When I first bought (1982), I think the most I could borrow was 3 x my salary. The size of the mortgages younger friends have tell me it's a lot higher than that now.