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??

@weansu

It does make me laugh when it's said that young people just need to move to an area with cheaper houses.

Tbf they are doing this hence the growth in UK prices, more FTBs left London to buy last yr than ever before. It just pushes prices up.

Exactly! and yes it's a solution on an individual level - it's how I became a home owner age 23 with no parental help two years ago (not saying that as a badge of honour - they would have absolutely helped if they could). But it's not a solution on a population level which is why the system isn't working.

Also, the only reason me and my husband could move to a cheaper area was because he works from home. If you can't work from home, you can't just up sticks and move anywhere you fancy!

Quantitive easing devalued wages & inflated assets & that's been the problem with bank policy relying too heavily on it since 08

I live just above North London and was able to buy a new build 2 bed, 2 bath flat for £169k back in 2015 at only 24 as the help to buy just came in. Only needed an £8k deposit which we saved up for by living at home for 2 years after Uni.

Managed to somehow sell the flat last year during the pandemic (when flats really weren’t in demand) for £215k so had good equity in the property, even with paying the help to buy back.

Bought a mid terrace 3 bed in the same area using the deposit plus my dad sadly died in 2020 so we used that inheritance to buy something that we could renovate completely. Without that inheritance we would have either had to buy a house that needed work but we weren’t able to do anything to, or have to move further out to a cheaper area in order to get something that was the same size but didn’t need work. Houses round here have gone through the roof even though it was once considered the cheapest area in the county!

Do you have to use the 'boomers' insult?

At least nowadays the woman's full wage is considered whereas previously, even if the woman earned twi e her husband's wage only half was considered. Also, iif you were a single woman it was next to impossible to get a mortgage.

My boomer mother managed to get a mortgage on her shop floor assistants wage (no partner) and no deposit in the 90's. Getting a mortgage after the 2008 crash is complete different to what it was before then, and that's not including house price inflation beyond wage increases.

There is no doubt that I and DH would have a mortgage now if we were applying in pre-2008 conditions. We have a good household income.

I think what the OP is saying is people of that generation need to just admit they had better conditions for buying instead of beating young people down. I think it is far easier for them to beat young people down than admit they have had it easy, but they shouldn't feel guilty, it was just the market was on their side at the time. There is no shame in that, so I don't understand why people won't admit it.

But why would FTB generally be needing a 3 bed semi? Surely the majority of FTB are young single adults or couples? Maybe that's some of the problem? People expecting houses larger than "needed"?

Most of my friends have been mid-to-late thirties when buying their first homes, by which point, expectations have gone up and they need to house babies and toddlers.

I’m one of four siblings who didn’t get any family money to buy.

DH and I bought our first home six years ago. He was 37 and I was 30. We were fortunate that he was given some large (unexpected) bonuses at work and we got a 1930s semi that we’ve since extended.

One brother has just managed to buy a small 2bed ex-council house at 35 with his wife. One bought a new build, three bed, in the middle of nowhere on a help to buy at 40, also with his wife. My sister is 43, a single mum and unable to buy. They all work full time in professional roles earning more than the UK average salary.

One set of grandparents died in the 1980s leaving very little. My dad died recently, leaving the house and his savings to my mum who will need that to support her and her care as she ages. She could live another thirty years. Our other set of grandparents are still alive in their 90s and have four children, 18 grandchildren and many great grandchildren. I can’t imagine we’ll inherit much at any stage.

I think what the OP is saying is people of that generation need to just admit they had better conditions for buying instead of beating young people down.

My boss bought in the 90s, interest only mortgage with barely any deposit on a 25k salary. That is not available today.

What did it for us was a) earning more than the average household - two educated professionals who both work full time and b) free money from LISAs

2 of us worked consistently on decent incomes for 7+ years, had an 85k deposit and did a 30% mortgage. We didn't forgo avocado but we never had a big fancy holiday in that time. No financial help from parents.

@SuitcaseOfWhine

Do you have to use the 'boomers' insult?

At least nowadays the woman's full wage is considered whereas previously, even if the woman earned twi e her husband's wage only half was considered. Also, iif you were a single woman it was next to impossible to get a mortgage.

My boomer mother managed to get a mortgage on her shop floor assistants wage (no partner) and no deposit in the 90's. Getting a mortgage after the 2008 crash is complete different to what it was before then, and that's not including house price inflation beyond wage increases.

There is no doubt that I and DH would have a mortgage now if we were applying in pre-2008 conditions. We have a good household income.

I think what the OP is saying is people of that generation need to just admit they had better conditions for buying instead of beating young people down. I think it is far easier for them to beat young people down than admit they have had it easy, but they shouldn't feel guilty, it was just the market was on their side at the time. There is no shame in that, so I don't understand why people won't admit it.

Exactly this - there seems to be an attitude that's really prevalent where people seem to find it difficult to accept when they had an advantage over other people. I really don't get it. No clue if it's a British thing or a generational thing or just a human thing.

It's not good for younger people to have so much income servicing a mortgage/rent.

Plus it's ridiculous that ones wealth these days is now largely determined by whether their own parents owned their home & if they can help. Social mobility is going backwards.

People are building equity as the prices rise. Our first house sold for ~£30k more than we paid for it. We’re selling our current house soon and it’s worth probably about £40k more than what we bought it for. Plus 20 years of paying off (and over paying as much as possible) mortgages at relatively low interest rates means we’ve built up a decent amount of equity over the years. However we were lucky and got on the property ladder young.

@FloBot7

*But why would FTB generally be needing a 3 bed semi? Surely the majority of FTB are young single adults or couples?

Maybe that's some of the problem? People expecting houses larger than "needed"?*

For a lot of them it's to start a family. The alternative is to sell in a couple of years when their one bed flat is too small for a growing baby and then incur SDLT, moving fees, selling and purchasing costs, not to mention the stress. There are also a lot of couples working from home who need somewhere to work.

Exactly this. I'm 33 and bought a one bed flat last year, it was what I could afford (and that was with help from my mum and gran). My partner and I plan to start trying for a baby this year, so at some point will need to either buy a bigger place or move out and rent somewhere bigger while renting out flat....all with a young child (hopefully). Needless to say it's going to be interesting We live in Bristol and house prices are really high here.

People are building equity as the prices rise.

But for lots of people this makes it harder to move up the ladder not easier. Unless you bought when very young.

I would advise anyone who is buying now to future proof, future proof, future proof. Buying in your 30s & want dc, skip the flat stage (unless you are happy to stay there) & get a house near schools that you can extend if needed.

I do worry for much of this generation and the next. I bought alone in 2003 with a graduate mortgage which meant I essentially didn't need a deposit. I put down £1000 on a £73000 two bedroom 1890s semi. Just a couple of years later I would have been priced out of the market

The only way we got on the property ladder in the early 00s was because of the keyworker scheme. We borrowed £9k for a deposit on a house in desperate need need of work. But at the time the only mortgages accepting the keyworker scheme we could use was variable rate mortgages.

Before we had even moved in our mortgage payments went up, within a couple of years it had doubled. We never really did manage to afford to do the house up properly.

Luckily for us, we bought a crap house in what became a mega desirable area and someone was chuffed to get a "bargain" in buying our house but for us it gave us over £100k profit.

Sadly, that £9k we borrowed was worked out on % so we had to pay back over £20k and had a large penalty on our mortgage, but we were still able to put down a large deposit on our dream house.

Proper mortgaged up to our eye balls, but we retire in 10 years with a very large pension payout so can pay any left over mortgage off then.

My friends all bought after us, but they managed with a mix of large gifted deposits from parents, living at home for years to save deposits, or huge inheritances.

It's not just boomers - there are a lot of people in Gen x (the generation after the boomers, so those born between 1966 and 1979) who managed to get mortgages with zero deposit in the five years before the crash. They still have large amounts of equity, particularly if they bought in London.

I know several 20 somethings who bought 2+ bed flats in London for c £300k between 2003 and 2007 when they were earning professional wages (£30-40k for junior lawyers, accountants etc), - zero deposit, bought jointly with a partner, so combined salaries of probably £70-90K.

Fast forward to 2012-2015 when they're trying to buy their first houses, and the flats have gone up in value to £500k. So there is the £200k deposit. And that advantage has stayed...

Other people I know who bought good houses post crash were military, as back in the day you got an army house for approx £200pcm rent.

It is so much harder for the current 20 somethings. Thanks to a decade of low interest rates, you've had massive asset appreciate that far outstrips wage inflation. My salary has gone down in real terms, despite being 14 years more senior (in a role where seniority dictates salary). I recognise how lucky I was to have access to no deposit mortgages and the support network (emotional, not financial) to be able to take the risk of buying a flat I couldn't afford. The emotional support allowed me to take the risk because i knew that if money got too tight, I'd have friends with spare rooms that I could rent, while I rented out my flat.

I think it's possible but only for a lucky few. A friend of mine got a good job after uni. He lived with his parents and was able to save about £20k/year over 5 or 6 years. His girlfriend also saved as much as she could. By the age of 35 they went straight for a 4 bed in Welwyn as they knew they'd be starting a family. They have a huge mortgage though.

I'm much older than him so was very lucky to have bought in 2000 and subsequently in the dip of 2012. We were able to keep our first house as a rental, with a view of helping the kids out in later life.

I wish housing wasn't like this but we can only do what we can to help our loved ones. Successive governments have screwed us all over sadly.

Someone upthread said that our kids will see huge amounts of inheritance and can believe it. Our kids may not actually need our help as they'll be part of a lucky group to benefit from this. I'm glad in some ways as our kids have had it so hard but in other ways this is going to increase the wealth division.

@00100001

Or is it that back in the good old days, there was often one income coming in? And now there's two? So there's more buying power, as basically two adults are pooling their earnings?

Yes I think it's as simple as that

In the past, house prices were generally limited to what was affordable on one salary. When more women started working, there was more money so prices went up

@MrsSkylerWhite

Lots of “boomers” are in pretty dire straits too, these days: whilst at the same time expected to be bank of mum and dad and Sunnydays residential home for elderly parents, too. It’s not all fun and games and sports cars. Dismissing a group of people as boomer is about as accurate as labelling another group as snowflakes.

Many female women of that age group are in a truly terrible financial situation.

I have to decide every single day (BEFORE energy price rises) whether to eat or heat. My lack of finances means I also walk everywhere possible so less energy in/more energy out means I am underweight which has caused significant health problems.

I'm totally fucking fed up of being lumped together with a group of rich white men.

@weansu

I think what the OP is saying is people of that generation need to just admit they had better conditions for buying instead of beating young people down.

My boss bought in the 90s, interest only mortgage with barely any deposit on a 25k salary. That is not available today.

Exactly. You just can't say the conditions for buying were the same across generations. I expect people did save and cut out luxuries back in the day, but that would have been a couple of years and not 15 years like you need to do now. Plus the rate house prices are rising, it just seems futile anyway as who knows what price they will be in 15 years. I think if you gave young people the conditions to buy we had 30 years ago, you would see a lot of saving and cancelling of Netflix. But really the savings people can make now are just a drop in the ocean compared to what is needed for a deposit, so that's why they don't bother.

I am not a "boomer". I had a trust fund, which enabled me to buy my first house (couldn't have done it on my income alone). Did it up and sold it for twice what I paid for it, then bought a house with XH which we did up and sold for twice the price again. And so on, to the extent that we were both able to buy decent houses with no mortgage when we divorced. Once you're actually on the property ladder, 'flipping' houses is a very good way to make your way up it.

Thanks to a decade of low interest rates, you've had massive asset appreciate that far outstrips wage inflation.

Yep, low interest rates have resulted in high prices, it's not just down to 2 incomes because women work.

Dismissing a group of people as boomer is about as accurate as labelling another group as snowflakes.

I thought baby boomers was the generational name though like millennials & gen X. What should we call them instead?

@Darbs76

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

So have the grandparents already died or are you expecting they won't need care etc?