Will the next generation be able to buy their own house?

chucknorris

Zero_Sum wrote: »

You made the point about folk earning decent money. Im basing my assumptions on salary statistics. Im not disagreeing that baby boomers have a lot of wealth. I just dont think its as liquid as you think, with most being tied up in property & pensions.

Why do you want your assets liquid? I definitely don't regret investing in property and equities, although I am now going through the process of selling property, but I have owned investment property for over 28 years. What I do regret is placing £170k in one year savings bonds in April, paying only just over 2% gross, so after inflation and tax, it is guaranteed to lose money (that's liquidity for you). I have bought the max allowed in the TPS (Teachers Pension Scheme), but that was only about £75k (gross), if I could invest a £1m I would asap, it might not be liquid, but it is exceptional value.

Zero_Sum

chucknorris wrote: »

Why do you want your assets liquid? I definitely don't regret investing in property and equities, although I am now going through the process of selling property, but I have owned investment property for over 28 years. What I do regret is placing £170k in one year savings bonds in April, paying only just over 2% gross, so after inflation and tax, it is guaranteed to lose money (that's liquidity for you). I have bought the max allowed in the TPS (Teachers Pension Scheme), but that was only about £75k (gross), if I could invest a £1m I would asap, it might not be liquid, but it is exceptional value.

Because we're discussing grandparents with excess cash they can readily dish out.

chucknorris

Zero_Sum wrote: »

Because we're discussing grandparents with excess cash they can readily dish out.

Yes but surely not everything? What you said was:

Zero_Sum wrote: »

Im not disagreeing that baby boomers have a lot of wealth. I just dont think its as liquid as you think, with most being tied up in property & pensions.

That is the best way to be invested, with 'most' being tied up in longer term investments, that doesn't prevent giving substantial sums to family and close friends.

Zero_Sum

chucknorris wrote: »

Yes but surely not everything? What you said was:



That is the best way to be invested, with 'most' being tied up in longer term investments, that doesn't prevent giving substantial sums to family and close friends.

I know. Im saying its not as easy for them to just hand over a wad of cash because most is tied up. The money is tied up in their own home. Not property investment, but their home where they live.

chucknorris

Zero_Sum wrote: »

I know. Im saying its not as easy for them to just hand over a wad of cash because most is tied up. The money is tied up in their own home. Not property investment, but their home where they live.

Ah OK I get it, I think when you said most, you probably meant to say 'nearly everything', not just 'most', that is the where we are at odds, we have about 10-20% (I'm not sure how much cash my wife has) of our portfolio in cash (the remaining cash % is of course easily 'most').

itwasntme001

Zero_Sum wrote: »

I know. Im saying its not as easy for them to just hand over a wad of cash because most is tied up. The money is tied up in their own home. Not property investment, but their home where they live.

No - many grandparents and parents have other assets outside of their own home - they have dc and db pensions which they are drawing now (including lump sums), they have cash they have saved up over the many decades, they have stocks sheltered in ISAs and they have less liquid assets such as btl and businesses which they can either sell or use the income from to gift their children and grandchildren. There are many like this in London, more then you think and that is what has caused London property to rise in value.

BikingBud

As usual on here lots of opinions and dits but nobody has referred to any facts or reports that may truly support personal anecdotes.

Do people not like to look at facts and then decide?
ONS

- On average, full-time workers could expect to pay an estimated 7.8 times their annual workplace-based earnings on purchasing a home in England and Wales in 2018.
- Housing affordability in England and Wales stayed at similar levels in 2018, following five years of decreasing affordability.
- At the local level, London boroughs had the widest range of estimated housing affordability; more than three times the range of any other region.
- Copeland, in the North West of England, remained the most affordable local authority in England and Wales in 2018; with average house prices being 2.5 times average workplace-based annual earnings.
- Kensington and Chelsea remained the least affordable local authority in 2018, with average house prices being 44.5 times workplace-based average annual earnings.
- There are 77 local authorities that became less affordable over the last five years (most were in London, the South East and the East of England); there were no local authorities in which affordability improved.
- In 2018, newly-built dwellings were estimated to be significantly less affordable than existing dwellings.

Affordability

Defining affordability for planning purposes

The most commonly referred to definition of affordable housing is set out in Annex 2 to the National Planning Policy Framework (NPPF). This is the definition that local planning authorities apply when making provision within their areas to meet local demand/need for affordable housing. The most recent version of the NPPF was published, following consultation, in July 2018. The revised NPPF states that where major development includes the provision of housing, at least 10% of the housing provided should be for affordable home ownership, subject to some exceptions.

and

Alternative measures of affordability

The definition of affordable housing set out in the NPPF does not make reference to the proportion of a household's income or earnings that should be spent on housing costs. The Housing Cost to Income Ratio (HCIR) was referenced in Planning Policy Guidance Note 3: Housing (the guidance which was repealed and replaced by the NPPF) and is frequently used in research into housing affordability.

Housing costs can be compared to earnings (the amount of salary an employee earns before tax and benefits) or to household income (all the income a household receives, after tax and benefits). Earnings data is frequently used because it is readily available at local level. However, income data provides a more complete picture - it accounts for households with multiple earners, and those with a high proportion of their income coming from benefits.

I would suggest therefore the answer can only be no.

itwasntme001

There is no point providing average numbers. House prices are determined at the margin. Why should those earning minimum wage or even 30k a year salary be able to afford a house in London? There are many in London earning wages of 70-80k+ and it is those who are the ones buying. Do not forget many children can and are living with their parents into their 30s which gives them the opportunity to build up a bigger deposit. Plus you got the fact that parents are gifting their children with records amounts of money - this is very much true in London as baby boomer generation have amassed enough wealth to be concerned about inheritance tax. So what better way to reduce this liability then to gift their offspring in order to help them buy a property.

itwasntme001

Do not forget that usually people buy a home as a couple - a couple obviously has a lot more purchasing power then a single!! London prices are not a bubble, i do not think they are even that expensive in a lot of areas.

BikingBud

itwasntme001 wrote: »

Why should those earning minimum wage or even 30k a year salary be able to afford a house in London? There are many in London earning wages of 70-80k+ and it is those who are the ones buying.

What does many mean? >100? >1000? >100k? Express as a percentage of the population, 8.8 Million, or if we use terms such as median it sorts it out:

According to data released by the Office for National Statistics (ONS), the median gross annual wage for people working in inner London is £34,473 – that means half earn more than this and half earn less. The median wage for the UK as a whole is £22,044.

I am not suggesting they should have an entitlement but if they cannot afford to buy, and or rent, and therefore cannot live locally, then who will do all those jobs, especially those below the median wage, especially the next generation until they gain experience and increase their worth and earnings potential?

Those that live with their parents, in illegal HMOs, in stealth vans? Or in tied housing, upstairs/downstairs stylee?

So we should decide upon a reasonable definition for affordable and then see where the median income sits in comparison with this.