Can you live solely off state pension?

Nebulous2

The lack of mobility has often been cited as a problem in the UK, compared with the USA for instance, where a surprising number of people - from memory about a third- don't live in the state they were born in. 

The supply and demand is an issue and expectations have changed. Many more households are a single adult, with a combination of divorce, longer lifespans, older relatives not moving in with family, or the other way round, families not moving in with older relatives. 

I know a fishing village where it was predominantly owner occupiers. After the war, early 50s, houses were £3000 each. There were often 3 families in a house. A great deal of council housing was built and people were delighted to get a council house to relieve overcrowding. 

As a result, in the late 60s / early 70s houses were selling for £600 a big long-term drop in value. 

Now the council houses are almost all owner occupiers, the old cottages are almost entirely second homes or holiday lets, and despite a doubling in size of the village, the permanent population is a third of what it was after the war. 

zagfles

Silvertabby said:

zagfles said:

QrizB said:

zagfles said:

Housing is overpriced because demand is being fed by people who see housing as a "good investment" rather than just somewhere to live. It's a complete myth the housing supply isn't growing as fast as the population. Supply of housing increased by 44% between 1970 and 2010. Population increased by 13% in the same period. Housing supply has massively outpaced population growth.

Who's living in all these investment properties? Have households become smaller, so growth in households has exceeded growth in population? Or are you saying they're empty?

Some people buy more property than they need because they can afford to and think it's a good investment. Example is a single bloke on our street living a 4 bed house. Why? Because he can afford it and everyone told him houses are a good investment, so he bought the biggest property he could afford. Another couple I know live in a 5 bed house even though they only have one child and no intention of having more. Other people buy second homes, which they might only live in a few weeks in the year.

Not necessarily.  There's always only been the two of us but we bought our 4 bedroom house because it met our needs, not as an investment.  OK, we originally looked at 3 bedroomed houses, but they lacked something from our 'absolutely must have' list - a separate utility room, washing machine and kitty litter tray for the use of.

But our home certainly isn't under utilised - main bedroom suite, guest bedroom, hobby room and study.  I very much doubt that the people you mention look at their 'spare' bedrooms and see £ signs.

Obviously it doesn't apply to everyone. I said "some". Some people do buy purely based on utility. But the fact is there are some people who buy more property than they need because they think it's a good investment. Or they think, well it'll go up in price so I'm not losing anything by buying a bigger property than I need so I may as well as buy as big a property as I can afford, and in the meantime I might find the extra space useful. Win win. That was the case with my neighbour. Those people increase demand, and hence prices.

michaels

zagfles said:

Silvertabby said:

zagfles said:

QrizB said:

zagfles said:

Housing is overpriced because demand is being fed by people who see housing as a "good investment" rather than just somewhere to live. It's a complete myth the housing supply isn't growing as fast as the population. Supply of housing increased by 44% between 1970 and 2010. Population increased by 13% in the same period. Housing supply has massively outpaced population growth.

Who's living in all these investment properties? Have households become smaller, so growth in households has exceeded growth in population? Or are you saying they're empty?

Some people buy more property than they need because they can afford to and think it's a good investment. Example is a single bloke on our street living a 4 bed house. Why? Because he can afford it and everyone told him houses are a good investment, so he bought the biggest property he could afford. Another couple I know live in a 5 bed house even though they only have one child and no intention of having more. Other people buy second homes, which they might only live in a few weeks in the year.

Not necessarily.  There's always only been the two of us but we bought our 4 bedroom house because it met our needs, not as an investment.  OK, we originally looked at 3 bedroomed houses, but they lacked something from our 'absolutely must have' list - a separate utility room, washing machine and kitty litter tray for the use of.

But our home certainly isn't under utilised - main bedroom suite, guest bedroom, hobby room and study.  I very much doubt that the people you mention look at their 'spare' bedrooms and see £ signs.

Obviously it doesn't apply to everyone. I said "some". Some people do buy purely based on utility. But the fact is there are some people who buy more property than they need because they think it's a good investment. Or they think, well it'll go up in price so I'm not losing anything by buying a bigger property than I need so I may as well as buy as big a property as I can afford, and in the meantime I might find the extra space useful. Win win. That was the case with my neighbour. Those people increase demand, and hence prices.

People buy cars with more seats than they need - are they depriving others of having car usage or do the manufacturers simply build to match demand - what should happen for housing.

I have not heard of people buying bigger houses than they need simply for investment reasons rather than perhaps prestige, liking having lots of space, liking a gap between themselves and their neighbours etc (although having said that, the tax system would encourage such behaviour for PPR but it is pretty risky as an investment due to lack of diversification)

If we built to demand we would also find that there was not the asset appreciation that comes from restricted supply negating that strategy.

Malthusian

zagfles said:

Some people buy more property than they need because they can afford to and think it's a good investment. Example is a single bloke on our street living a 4 bed house. Why? Because he can afford it and everyone told him houses are a good investment, so he bought the biggest property he could afford. Another couple I know live in a 5 bed house even though they only have one child and no intention of having more. Other people buy second homes, which they might only live in a few weeks in the year.

On the more prosaic end of the scale, I wager there's fewer large working-class families topping-and-tailing their children in one bedroom than there were in 1970.
Rising population is one thing but no government in history has been able to keep pace with rising expectations.

zagfles

michaels said:

zagfles said:

Silvertabby said:

zagfles said:

QrizB said:

zagfles said:

Housing is overpriced because demand is being fed by people who see housing as a "good investment" rather than just somewhere to live. It's a complete myth the housing supply isn't growing as fast as the population. Supply of housing increased by 44% between 1970 and 2010. Population increased by 13% in the same period. Housing supply has massively outpaced population growth.

Who's living in all these investment properties? Have households become smaller, so growth in households has exceeded growth in population? Or are you saying they're empty?

Some people buy more property than they need because they can afford to and think it's a good investment. Example is a single bloke on our street living a 4 bed house. Why? Because he can afford it and everyone told him houses are a good investment, so he bought the biggest property he could afford. Another couple I know live in a 5 bed house even though they only have one child and no intention of having more. Other people buy second homes, which they might only live in a few weeks in the year.

Not necessarily.  There's always only been the two of us but we bought our 4 bedroom house because it met our needs, not as an investment.  OK, we originally looked at 3 bedroomed houses, but they lacked something from our 'absolutely must have' list - a separate utility room, washing machine and kitty litter tray for the use of.

But our home certainly isn't under utilised - main bedroom suite, guest bedroom, hobby room and study.  I very much doubt that the people you mention look at their 'spare' bedrooms and see £ signs.

Obviously it doesn't apply to everyone. I said "some". Some people do buy purely based on utility. But the fact is there are some people who buy more property than they need because they think it's a good investment. Or they think, well it'll go up in price so I'm not losing anything by buying a bigger property than I need so I may as well as buy as big a property as I can afford, and in the meantime I might find the extra space useful. Win win. That was the case with my neighbour. Those people increase demand, and hence prices.

People buy cars with more seats than they need - are they depriving others of having car usage or do the manufacturers simply build to match demand - what should happen for housing.

I have not heard of people buying bigger houses than they need simply for investment reasons rather than perhaps prestige, liking having lots of space, liking a gap between themselves and their neighbours etc (although having said that, the tax system would encourage such behaviour for PPR but it is pretty risky as an investment due to lack of diversification)

If we built to demand we would also find that there was not the asset appreciation that comes from restricted supply negating that strategy.

Here's a survey of reasons why people want to buy a home in the UK.

https://www.statista.com/statistics/1033483/main-reasons-why-people-want-to-own-their-own-home-uk/

"Over a third of respondents also said that it was a means of future wealth preservation"

michaels

My housing wealth is equal in value to 1 home, it was equal to one home when I purchased it for £380k and it is still worth exactly one home to me now whatever the currency value.  I have a need of exactly one home so I am neither 'long' nor 'short' homes.  If I were renting I would be 'short' home assuming I wanted to have a home at some point in the future.  If I owned two housing properties I would be long 'home'.  I don't want to speculate so am not in either of those positions. 

(As mentioned above govt intervention making this asset class free of capital gains tax may encourage people to over invest in their homes so they purchase not just the home they need but a larger property on the grounds that any gains will not be taxed but I suspect this is small - the return on your 'home' investment is the hosing service it provides to you - over invest and the extra housing service you receive is probably of minimal value offsetting any benefit that might come from the capital gains advantage - personally I don't see people buying a bigger house than they would otherwise for that reason but I have no data either way)


Some people (and companies) run a business providing housing services to those who chose to rent (as I chose earlier in my life as despite being short 'home' it made financial sense to avoid the high transaction costs involved with changing homes).  These people are meeting a need that were it not satisfied would lead to higher prices for renting to equate supply and demand of rental properties.  Perhaps the existence of housing benefit for renting but not buying skews the market boosting the size of the rental sector compared to the owner occupier sector but that is what subsidies will do.  Generally with markets, the price will move to a level where supply and demand are in equilibrium.  Housing is unusual in that supply does not rise with prices (inelastic) because of planning restrictions which mean that in high demand areas prices rise way above construction costs with economic rent going to those lucky (connected?) enough to obtain planning permission.

So we have 3 govt policies that distort the housing market:
1) Housing benefit
2) PPR tax relief
3) Restrictions no land use

zagfles

michaels said:

My housing wealth is equal in value to 1 home, it was equal to one home when I purchased it for £380k and it is still worth exactly one home to me now whatever the currency value.  I have a need of exactly one home so I am neither 'long' nor 'short' homes.  If I were renting I would be 'short' home assuming I wanted to have a home at some point in the future.  If I owned two housing properties I would be long 'home'.  I don't want to speculate so am not in either of those positions. 

So what? That's you. Me too. But some people do buy for investment purposes as well as utility.

(As mentioned above govt intervention making this asset class free of capital gains tax may encourage people to over invest in their homes so they purchase not just the home they need but a larger property on the grounds that any gains will not be taxed but I suspect this is small - the return on your 'home' investment is the hosing service it provides to you - over invest and the extra housing service you receive is probably of minimal value offsetting any benefit that might come from the capital gains advantage - personally I don't see people buying a bigger house than they would otherwise for that reason but I have no data either way)

I've just posted some data. Just because you don't see it doesn't mean it doesn't exist.

Maybe the govt should simply abolish PPR tax relief then. If you're right, nobody will complain. What do you think?

Some people (and companies) run a business providing housing services to those who chose to rent (as I chose earlier in my life as despite being short 'home' it made financial sense to avoid the high transaction costs involved with changing homes).  These people are meeting a need that were it not satisfied would lead to higher prices for renting to equate supply and demand of rental properties.  Perhaps the existence of housing benefit for renting but not buying skews the market boosting the size of the rental sector compared to the owner occupier sector but that is what subsidies will do.  Generally with markets, the price will move to a level where supply and demand are in equilibrium.  Housing is unusual in that supply does not rise with prices (inelastic) because of planning restrictions which mean that in high demand areas prices rise way above construction costs with economic rent going to those lucky (connected?) enough to obtain planning permission.

So we have 3 govt policies that distort the housing market:
1) Housing benefit
2) PPR tax relief
3) Restrictions no land use

Plus help to buy schemes, plus council tax relief for under utilisation.

Perhaps removing all planning permission would work. It would definitely reduce the investment potential of housing. It might even result in less house building as demand would be reduced by loss of investment potential

Pat38493

The other thing that hasn’t been mentioned is that as far as I understand (?) when someone takes out a mortgage to buy a new home, if you try to trace where the money the lender gave you actually came from, you will have big problems finding it - the only they lend you is effectively magicked from thin air.

handful

I think a large part of the property problem is that many people approaching or in retirement have houses that are bigger than they need but the level of downsizing required to actually realise any capital puts them off. Stamp duty in particular plays a massive part. I would quite like to drop from 4 beds to 3 but if I did I wouldn't actually benefit apart from having paid my stamp duty/legal fees, estate agents fees. Therefore, one and often two bedrooms remain empty.

michaels

handful said:

I think a large part of the property problem is that many people approaching or in retirement have houses that are bigger than they need but the level of downsizing required to actually realise any capital puts them off. Stamp duty in particular plays a massive part. I would quite like to drop from 4 beds to 3 but if I did I wouldn't actually benefit apart from having paid my stamp duty/legal fees, estate agents fees. Therefore, one and often two bedrooms remain empty.

Also you might want a smaller property but a footprint pretty much the same size - perhaps a detached bungalow but the restriction on building land means that no bungalows are built and existing bungalows are converted to higher density.  Thus if you want to stay detached there is no downsizing option.  But at a more basic level, why would people chose to downsize just to make supply available to others if they like having the space - we don't tell people they need to sell their big cars and buy smaller ones because they no longer drive their kids around and road space is limited.....