Debate House Prices


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Income vs Inheritance

cells
cells Posts: 5,246 Forumite
Came up in another debate seems interesting topic to think about.

My guess/estimate is something like £100 billion a year is inherited or gifted mostly from the older to the younger.

Somewhere like London will have a lot more people with wealth and assets than than Stoke-On-North-Midlands-Trent

So when it comes to buying homes its not just about people with incomes competing to buy homes. The idea of average wage affording the average home needs some adjustment. It is about inheritance and gifts too. This is true all over England but more so in London.

It might not seem 'fair' but a person on an OK income can be outbid by people on the same or even lower income plus inheritance/gifts.
«13456

Comments

  • cells
    cells Posts: 5,246 Forumite
    edited 9 April 2016 at 12:40AM
    I think my estimate/guess of £100 billion a year inherited might be off the mark. I recall reading the UK stock of capital is (homes shares savings) in excess of £10 trillion. If wealth is held for 50 years before a person needs to pass it on that would be about £200 billion a year in gifts and inheritance from the older to the younger

    To put that into perspective its more than enough to buy outright all the ~1 million homes sold per year and I suspect a lot of inheritance does end up in housing both BTL and buying Owner Occupied homes to live in

    It goes some way to explain how the rental market can expand by 440,000 units in a single year with only ~100,000 BTL mortgages issued.
  • cells
    cells Posts: 5,246 Forumite
    edited 9 April 2016 at 12:58AM
  • cells
    cells Posts: 5,246 Forumite
    edited 9 April 2016 at 1:12AM
    http://www.dailymail.co.uk/news/article-2517699/Two-people-expect-leave-average-inheritance-180-000-loved-ones.html

    people are not buying homes with just incomes and saved deposits, they are buying them with the £180k grandma leaves them

    and if its a London grandma its possible triple that figure

    unaffordable house prices look a lot more affordable when we consider the gifts and inheritances people seem to be getting.
  • seven-day-weekend
    seven-day-weekend Posts: 36,755 Forumite
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    Every FTB I know who has bought a house in the last few years has had help, most of them from inheritances.
    (AKA HRH_MUngo)
    Member #10 of £2 savers club
    Imagine someone holding forth on biology whose only knowledge of the subject is the Book of British Birds, and you have a rough idea of what it feels like to read Richard Dawkins on theology: Terry Eagleton
  • HornetSaver
    HornetSaver Posts: 3,732 Forumite
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    So basically, if your parents were not rich, you do not have the right to put a roof over your head?
  • Generali
    Generali Posts: 36,411 Forumite
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    To work through the figure, apparently there are about 540,000 deaths a year. Of those, half leave less than £5,000 and half more. The half leaving more than £5,000 leave an average of £260,000 so total inheritance is probably about £72bn or roughly the OP's figure. Good guestimation cells!

    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/450011/IHTNationalStatisticsCommentary.pdf
  • cells
    cells Posts: 5,246 Forumite
    Generali wrote: »
    To work through the figure, apparently there are about 540,000 deaths a year. Of those, half leave less than £5,000 and half more. The half leaving more than £5,000 leave an average of £260,000 so total inheritance is probably about £72bn or roughly the OP's figure. Good guestimation cells!

    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/450011/IHTNationalStatisticsCommentary.pdf

    Thanks. That might be how much is left on death there will be some (perhaps more) left before death via gifts for both minimising IHT and because lots of people prefer sorting their affairs out before death.

    What do you think of my general point. That housing and affordability (especially in London) needs to tale onto account gifts and inheritances when considering affordability or if prices are high/low
  • Generali
    Generali Posts: 36,411 Forumite
    10,000 Posts Combo Breaker
    cells wrote: »
    Thanks. That might be how much is left on death there will be some (perhaps more) left before death via gifts for both minimising IHT and because lots of people prefer sorting their affairs out before death.

    What do you think of my general point. That housing and affordability (especially in London) needs to tale onto account gifts and inheritances when considering affordability or if prices are high/low

    TBH I'm not sure.

    On the one hand people are inheriting later and later in life as people have children later and live longer. However it's hard to see how that sort of money can't have an impact and a fair chunk of it probably skips a generation: when my parents' relatives have died my parents have inherited most of the money but some has made its way to me. If I came from a richer family that would have been a substantial sum if I'd still got the same proportion.

    It seems like a reasonable premise.
  • cells
    cells Posts: 5,246 Forumite
    So basically, if your parents were not rich, you do not have the right to put a roof over your head?

    That has probably been true for a long time.

    We may think that prices have gone up and renting has boomed but the truth is ownership is still far higher than the average has been for the last 100 years

    A poster by the name of Hamish used to post a few years back how mortgage availability especially 95-100% LTV was the great equaliser. When people could obtain 100% affordable mortgages then gifts and inheritances were less important.

    It is 'unfair' that some people will receive lots of inheritances and gifts while other will get none. I'm not sure what if anything needs to be dine about that. The only good news is that the law of averages and marriage and even divorce means some people who expect they will get nothing with actually share in their partners inheritances and capital
  • HornetSaver
    HornetSaver Posts: 3,732 Forumite
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    But cells, to be clear, I'm not specifically talking about ownership with that comment.

    It's not "fair" that those with large inheritances will be able to buy whilst those without and on similar incomes won't, but that's a fact of life. Whether inheritance tax is 0% or 60%, it will remain a fact of life for as long as currency is in existence. And to my knowledge even the radical left isn't proposing abolishing currency.

    The question of how the young can afford to put roofs over their heads when costs continually go up faster than inflation (be that council houses, rented or owned) without an ever-growing government spending programme is highly relevant to the wider discussion over housing. It's also a discussion distinct from the question of whether those houses are as good as young people in the previous generation would have had.
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