Boomers at my work boasting of property wealth

lisyloo

See: Pyramid schemes

How is housing a pyramid scheme?
There is finite supply (that's a big part of the problem).
For the time being there are enough "haves" to keep the "have nots" priced out. Eventually the "boomers" will die off, but I'm not expecting to for 45 years, so don't hold your breath for things to change.

I'm not saying any of that is good BTW.

chucknorris

ShAnE wrote: »

See: Pyramid schemes

If you believe that buying property is a pyramid scheme, why does your signature give a house deposit saved %? Why would you want to buy into something that you believe to be a pyramid scheme?

padington

lisyloo wrote: »

How is housing a pyramid scheme?
There is finite supply (that's a big part of the problem).


For the time being there are enough "haves" to keep the "have nots" priced out. Eventually the "boomers" will die off, but I'm not expecting to for 45 years, so don't hold your breath for things to change.

I'm not saying any of that is good BTW.

Increasing state subsidies for first time buyers can feel a little like a pyramid. Especially in an economy where high house prices have been the universally accepted answer to help pay for caring for our old.

We need to keep them high for the model to work but to keep them high we need to state fund the arrangement more every year because the prices keep going up and first time buyers need more help year on year. Also more the government gets in on the action and underwrite loans based on equity pay back, more the government is reliant on increasing prices.

To be honest, it's this dynamic which I can see no way out at the moment and is the key reason why I'm so bullish about non mansion tax applicable UK property over the next five year period.

Low interest rates are here to stay, FTB subsidies are here to stay, underwhelming house building is here to stay ( albeit more than there was) , tax arrangements encouraging the public to pour money into normal priced housing are here to stay
(albeit slightly worse than they were for normal priced properties, I think a council tax review is inevitable).

There will be downs as well as the ups but I expect many more ups to the downs still. It's not healthy either in the long term, it's a bit like pouring your life's energy into gold. Having your brilliant computer programmers pouring money into mortgages instead of genius software is stupid but we're trapped by our debt ( or lack of leadership ) it seems.

In an ideal world we should build loads of houses, ease up on credit conditions, sell many flats to foreigners but somehow encourage everyone with business aspirations to not stick most of their lolly into bricks and mortar and instead aim for higher goals and ensure those new business profits stays in Blighty and encourage everyone else to help them and use these new profits to pay for our old age.

Maybe this is ed's plan already, maybe he's prepared to crash the housing market big time ( fast or slow )and realign all our priorities to do this. If so, it's going to be nasty ride for property owners but I don't think he will. Reducing the majority of the paper wealth of 'hardworking families' surely is electoral suicide, no ?

lisyloo

I see what you mean now, but I see it as more of a Permanently high plateau. On the whole rental yields are pretty low for BTL and buying/rents are already at limits of affordability.
Demand is not inelastic. For example if a lanlord in a nice central part of London puts up rent then people won't simply pay, they will move further out and find somewhere cheaper. That might have a ripple effect but when people hit the buffers then most simply don't have a choice of paying more.
I'm not bearish at all, but I only see modest rises.

ShAnE

chucknorris wrote: »

If you believe that buying property is a pyramid scheme, why does your signature give a house deposit saved %? Why would you want to buy into something that you believe to be a pyramid scheme?

Because I believe there will be many more people in the future who want to buy my house.

Sure I may have to battle 5-6 people in a similar position to me, for a house a baby boomer paid peanuts for, but in 30-40 years there will be 20-30 people battling it out complaining I only paid £000,000s for my house.

lisyloo

Because I believe there will be many more people in the future who want to buy my house.

So you believe ever increasing prices are sustainable even though wages are barely going up?

ShAnE

lisyloo wrote: »

So you believe ever increasing prices are sustainable even though wages are barely going up?

Yep the government seems hell bent on helping property prices moving upwards with their rock bottom interest rates and government backed help to buy schemes.

It'll take a brave set of people to come in raise interest rates and cut funding to get onto the housing ladder as millions of people would be crippled by negative equity.

Cyberman60

Herzlos wrote: »

You mean, comparing a 30 year old in 2015's wealth to a 30 year old in 1985's wealth, factoring in inflation? Is there any source to that?

Or are you just saying that 30 year olds have less property wealth than 60 year olds?

I don't necessarily disagree with you, but at 30 I could have bought the same house my parents bought at 30 with approximately the same household income.

I bought my first house one year before my 30th birthday in 1984, a two bed end-terraced in Berks for 37.5K which was just under 4 times my salary, around 9K.

4 times salary today for a professional doing the same job in IT would be 4 times 40K = 160K, so a similar house is more or less still affordable as a starter home.

http://www.zoopla.co.uk/for-sale/houses/berkshire/?beds_min=2&include_retirement_homes=true&include_shared_ownership=true&new_homes=include&price_max=200000&q=berkshire&results_sort=newest_listings&search_source=for-sale


People whinge too much IMO !!! Work hard and you will be rewarded. :T

chucknorris

ShAnE wrote: »

Because I believe there will be many more people in the future who want to buy my house.

Sure I may have to battle 5-6 people in a similar position to me, for a house a baby boomer paid peanuts for, but in 30-40 years there will be 20-30 people battling it out complaining I only paid £000,000s for my house.

If you believe that it is sustainable (as you say above to Lisyloo) then you can't believe that it is a pyramid scheme, a pyramid scheme is something with an unsustainable business model.

Conrad

lisyloo wrote: »

I'm not bearish at all, but I only see modest rises.

Where I've been investing around the M25 I envisage a lot more capital growth yet as more and more people are defaulting to these cheaper regions which is fast pushing up prices.