A change in the way people own property?

zagubov

It seems to me that all the large properties will be passed on to empty-nest pensioners who'll rattle about in excessively large homes while young families will still be stuck renting or buying small overpriced flats/starter homes where you couldn't (and shouldn't) swing a cat, let alone bring up a family.

lisyloo

economic wrote: »

I don't think GreatApe is saying that. What i think he is saying is that despite the media and politicians going on about the wealth divide across generations, it is actually the younger generations who will be looking to inherit vasts sum of money from their parents. So if we tax the older generation massively for their wealth, we are only hurting the vast majority of younger generation as they will stand to inherit less.

The original question of the thread is will it change the way people own property and I think anyone that rents on the basis of a windfall at 61 is bonkers because there is a chance totally out of their control that they might be a minority case. I did see somewhere recently that half of women and a third of men will pay for care. I can’t find a link to those stats but I think it’s (or will be) a significant minority not a tiny one.

There are other reasons for renting of course. I’m renting in London because a well paid job justifies it and the short term nature/risk means renting fits the bill. Few deny that home buying is a Mathematical certainly if you live in the same place in the medium/long term. It stands to reason that if people becomes More economically mobile then renting may be more suitable for some, however that’s probably a minority case at the moment.

economic

lisyloo wrote: »

The original question of the thread is will it change the way people own property and I think anyone that rents on the basis of a windfall at 61 is bonkers because there is a chance totally out of their control that they might be a minority case. I did see somewhere recently that half of women and a third of men will pay for care. I can’t find a link to those stats but I think it’s (or will be) a significant minority not a tiny one.

There are other reasons for renting of course. I’m renting in London because a well paid job justifies it and the short term nature/risk means renting fits the bill. Few deny that home buying is a Mathematical certainly if you live in the same place in the medium/long term. It stands to reason that if people becomes More economically mobile then renting may be more suitable for some, however that’s probably a minority case at the moment.

Well that's another discussion entirely. People chose to rent or buy depending on a number of factors mostly to do with affordability and security of tenure / mobility.

I would find it stupid if someone were to base their lives around some inheritance they will likely receive when they are 60.

If one is 30 or even 40, that's 30 or 20 years where a lot can change potentially. Including far left wing policies which could very well impose a 100% tax on inheritances.

lisyloo

economic wrote: »

If one is 30 or even 40, that's 30 or 20 years where a lot can change potentially. Including far left wing policies which could very well impose a 100% tax on inheritances.

Agree completely.
When I started working my state pension age was 60, now it’s 67 (not complaining and very aware you can retire when you like if you’ve made provision).
I also saved extra for many years as I expected a female annuity to be more expensive. Now they’ve been equalised and I don’t need an annuity. That Wasn’t a nagatove change but just goes to show that over the long term the rules can change significantly.

Why shouldn’t they take care home fees from estates retrospectively?
Theft? Depends on whether your a beneficiary or a taxpayer!

I’d argue that for those of us with sensible/comfortable proviosn that changes to rules are one of the biggest risks to our plans.
People with decent pensions are hoping for a tax free lump sum, personal allowance and basic rate tax band - all assumptions.

economic

Actually the chances of any form of left wing government over the next 20 years are pretty high. We have had no recession for 8 years. The business cycle will eventually turn down. The question is how hard will it turn and what will that mean for politics?

It is ignorant to assume growth (albeit shallow) continues without interruptions. There is always a business cycle and therefore an economic cycle.

economic

lisyloo wrote: »

Agree completely.
When I started working my state pension age was 60, now it’s 67 (not complaining and very aware you can retire when you like if you’ve made provision).
I also saved extra for many years as I expected a female annuity to be more expensive. Now they’ve been equalised and I don’t need an annuity. That Wasn’t a nagatove change but just goes to show that over the long term the rules can change significantly.

Why shouldn’t they take care home fees from estates retrospectively?
Theft? Depends on whether your a beneficiary or a taxpayer!

Yes rules can and will change over the course of time. We have no idea what the economic trajectory will be over the next 3-5 years, how the hell would we know about the next 20-30 years?

lisyloo

economic wrote: »

Yes rules can and will change over the course of time. We have no idea what the economic trajectory will be over the next 3-5 years, how the hell would we know about the next 20-30 years?

Ours are very unlikely to last even 5 years and we still have no idea.
Literally a minority case but paying for care is/will be a significant minority.

Windofchange

I'm not sure how much of a conscious decision it will be for many. Unless your parents die very young, which I hope mine don't, then you are looking at around 75 - 80 for the average person. Makes most offspring in their 50's at least. So, for those whose parents don't want to equity release or downsize, there isn't going to be an inheritance until much later in life. The argument therefore that there are large pots of gold coming to millennials in their younger years is one that I would suggest isn't well substantiated.

The original article I cited from the Resolution foundation states that:

1) People may be pensioners themselves before they get any sort of inheritance
2) There are going to be a lot of people who get nothing / a very small inheritance

In terms of everyone inheriting vast sums, we have done this to death on another thread. To recap (Figure 1, institute for fiscal studies):

https://www.ifs.org.uk/publications/8239

"The wealthiest 1% of households hold about 20% of household wealth, the top 5% of hold approximately 40%, and the top 10% hold over 50% of wealth"

If your parents are not in the top 25% or so of the country, you aren't going to be inheriting huge life changing sums of money.

I agree with an earlier poster that there has been a large societal change. Youngsters are less bothered about traditional markers of success - marriage, mortgages, children, successful career. They can expect to live far longer than their parents, and so I guess what's the rush? If you are going to live into your 90's, then 30 is nothing!

I'm not trying to propose that waiting until 60 and assuming your parents don't need healthcare is a wise thing to do, but for many who perhaps don't have familiar wealth, and / or don't have the ability to save (or who have chosen not to of course), there may be a surge in property owners who have never had a mortgage.

GreatApe

lisyloo wrote: »

So are you saying you think individuals should base their personal financial planning on that?

Whatever the averages say it’s a huge risk for an individual to base their lifetime financial planning on isn’t it? (I’m excluding the rich).

It isn't a necessity to live a good life bit it is a huge bonus. A bonus that the majority get

GreatApe

economic wrote: »

Out of this significant wealth, how much of it is primary residence property and how much of the significant wealth is gifted vs. inherited?

I suspect by far most of the wealth is in primary residence and private pensions (> 80%) and that most of the wealth is inherited and not gifted (>90%). But i am just guessing.

Whilst this wealth would be useful for someone in their 60s (when they expect to receive it), i am not sure how someone who is 30 with parents who are still alive and healthy can say they are lucky to have wealthy parents when by far most of the parents wealth wont be seen and able to be used till their parents die.

There is a breakdown on the Inheritences stats on the ons page. From memory half was homes and the other half a mix of everything else.

My assumption is that gifting is on a similar scale of inherited wealth
We can have a guess. We know the UK is £10 trillion wealth. Let's say 0-25 year olds hold close to zero. 26-50 year olds 1 unit and 51+ year olds 2 units. That means the oldies own about £6.6 trillion and live about 30 more years so they will pass down at a rate of about £220 billion a year.

Inheritences were about 75 billion a year but that data is a few years old now so let's say £100 billion inherited means another £120 billion or so gifted.

It's a reasonable guess to say £100 billion inherited and £120 billion gifted annually.
It will be close to that


Lots of young ones get gifted wealth
From parents buying their first car/car insurance/dirivng lessons (£6k perhaps doesn't sound a lot but if 1/3rd of a million kids get that each year = £2 billion annually just there)
To parents gifting whole homes or significant deposits to buy a home.