Buy to Let and private renting

[plodder]

I live in SE England i.e. London commuter belt

I work in the NHS but I'm a lab gremlin, and somewhat of a specialist, so on a salary above the national average (not much above but still). The lab techs who are on Band 2 and 3 easily spend 80% of their take home pay on rent. The social housing waiting list in the area is so long that odds are they'd never reach anywhere close to the top of it.

I have to live in a shared house to be able to afford rent. Getting a gaff of my own renting I'd be easily looking at over half my net take home pay on rent alone. Even before you then factor in bills, council tax, inflation (and the fact that any pay "rises" we get are below inflation so your pay doesn't go as far each year). Sharing at least means once you've covered rent, bills etc you still have a bit left over at the end of the month.

Mortgage repayments would be about what I pay in rent in my HMO BUT I'm never going to be able to get a mortgage because the banks ask for so much of a deposit, and renting means that I'm never going to save enough to afford a deposit. House prices mean that even something like a 10% deposit is a chunk more than I've got in the bank.

TBH I'd be more happier being part of "generation rent" than I do now IF tenants had any rights at all. At the mo I can be booted out or have my rent hiked exponentially with a couple months notice. I have colleagues who literally move house every 6 months or a year because the landlord has hiked rents or decided they can make more letting to students or Air BnB-ing it to tourists. I'm lucky - I've managed 4 whole years in my current place, but have been given my marching orders for the end of November. And each time you have to raise a new deposit, letting agency fees, sort out transport to move your stuff (I can't drive, so it's not like I can just load a car up or something), sort out post diverts and so on. And good luck getting your previous deposit back whole - hypothetically landlords can't take money off for reasonable wear and tear but they all do, and cost (in both time and money) of going to small claims means it isn't worth it.

yes. this was my situation until a few years ago when we had some help to get a deposit. the difference between having a mortgage and having to rent is astonishing.

[plodder]

The interesting thing a lot of people aren't talking about is this

There are a couple of generations of people now who are basically never going to be able to afford to buy a house. Because our relationship to the property market is never going to change, no matter how much we scrimp and save, there basically isn't any point even trying to save for a deposit. You're never going to be able to save enough to get your foot on even the bottom rung. So if there's no point trying to save, why do it? A lot of my peers spend extensively on leisure pursuits, holidays and so on. They're going to get to the end of their working lives having paid enough money in rent to have paid the mortgages on two or three different properties (their landlord's properties obviously), but with nothing to show for it.

How are they going to fund their social care? The Tory sleight of hand about "solving" social care only covers care costs. Doesn't cover board and lodgings. I'd reckon a big chunk of the millenial (me - just) and generation Z groups will never have enough assets to be able to pay. And with an aging population and demonisation of immigrants putting people off coming to the UK, there's going to be fewer people coming after us to put money in to paying for us. The current lack of affordable housing is also going to end up exacerbating the lack of funding for social care.

CF

maybe. i worry about the amount of wealth that is tied up in property when it ought to be sloshing around doing useful things, but as long as it’s not all being funnelled to the banks I guess it’s being spent on Vaguely Useful Things, which are taxable etc. Generation Rent won’t have a big individual asset base to fall back on though, which was the whole point of home ownership in the first place...

[Woodchopper]

So about half the household's income went on rent (obviously women didn't earn wages as housework for a family was a full time job then).

Women in the poorest families often did do some paid work in those days, but yes, having half your income go to an investor is grim.

That rather depends on whether you have one of those old fashioned jobs for life or not. If you lose your job, owning your house can be quite a problem as you have to sell it or let it, and if you lost jour job due to an economic downturn (which might be fairly local if a big employer closes) that can be difficult. And, in sufficiently bad times, your mortgage repayments can rise to the point where you can no longer pay them. In the 70's and 80's interest rates were typically over 10% and peaked about 17%. Today's rates are minuscule.

Not sure which country you're based in, but in the UK you can get help paying mortgage interest (but not capital) from the state for mortgage balances up to (I think) about 200k iirc, as that usually works out cheaper than paying the rent via housing benefit for a re-housed family. Mortgage repossessions don't generally start with the first missed repayment either, so it very much depends how quickly you get another job. They're definitely supposed to try and work out a repayment plan with you first, and if you can't agree on one then they have to go to court https://england.shelter.org.uk/housing_ ... on_process

In the UK its also possible to get mortgage payment protection insurance which will cover the payments for a period in case of unemployment or sickness.

[sheldrake]

There are a couple of generations of people now who are basically never going to be able to afford to buy a house. Because our relationship to the property market is never going to change, no matter how much we scrimp and save, there basically isn't any point even trying to save for a deposit. You're never going to be able to save enough to get your foot on even the bottom rung. So if there's no point trying to save, why do it? A lot of my peers spend extensively on leisure pursuits, holidays and so on. They're going to get to the end of their working lives having paid enough money in rent to have paid the mortgages on two or three different properties (their landlord's properties obviously), but with nothing to show for it.

I started noticing this amongst younger people I worked with a few years ago. Even amongst people paid quite a bit more than the national average. It's causing many of them to check out of capitalism as they have no stake in it. Crypto and stock market investing are bringing a few in. There's a slim optimistic case that we might just become more like continental europeans in our financial habits; give up on real-estate investing and focus on stock market investments like young germans often do. However, this is by no means the most likely scenario.

How are they going to fund their social care? The Tory sleight of hand about "solving" social care only covers care costs. Doesn't cover board and lodgings. I'd reckon a big chunk of the millenial (me - just) and generation Z groups will never have enough assets to be able to pay. And with an aging population and demonisation of immigrants putting people off coming to the UK, there's going to be fewer people coming after us to put money in to paying for us. The current lack of affordable housing is also going to end up exacerbating the lack of funding for social care.

Many will be inheriting from boomers over the next 20-30 years, but there's also a real risk they'll vote for a hard left government that quickly finds there isn't much wealth to tax (you can only sell so many country estates to chinese businessmen before the tax revenue runs out once the employers all pull their investments to other countries).

[Bird on a Fire]

People's end-of-life social care can be posthumously claimed against their estate. A lot of boomers won't be leaving much to their kids. As cited above, a typical inheritance is £11k which only gets you a few weeks in a home.

So there's definitely a big bubble that's going to burst there.

[sheldrake]

People's end-of-life social care can be posthumously claimed against their estate. A lot of boomers won't be leaving much to their kids. As cited above, a typical inheritance is £11k which only gets you a few weeks in a home.

So there's definitely a big bubble that's going to burst there.

Is 11k a mean average? lots of people who own a home outright will leave a bigger estate than that. Also, a lot of people still die in hospital or at home, and many people pass on quite swiftly after being moved into a home (my mum lasted just over a week).

[Bird on a Fire]

People's end-of-life social care can be posthumously claimed against their estate. A lot of boomers won't be leaving much to their kids. As cited above, a typical inheritance is £11k which only gets you a few weeks in a home.

So there's definitely a big bubble that's going to burst there.

Is 11k a mean average? lots of people who own a home outright will leave a bigger estate than that. Also, a lot of people still die in hospital or at home, and many people pass on quite swiftly after being moved into a home (my mum lasted just over a week).

Nope, a median:

Some millennials have unrealistic expectations of inheritance and how it may unlock the door to buying a first home, a survey suggests.

One in seven young adults expect to inherit money before they are 35, although in reality the typical inheritance age is between 55 and 64.

The survey, by wealth manager Charles Stanley, suggested that young people expected to receive nearly £130,000.

However, the median average amount handed down was only £11,000.

https://www.bbc.com/news/business-48213333

Sorry to hear about your parents.

[sheldrake]

However, the median average amount handed down was only £11,000.

https://www.bbc.com/news/business-48213333

Genuinely surprised. I wonder how it breaks down ? (e.g. have I overestimated home ownership, underestimated how many siblings stuff gets shared between etc..)

Sorry to hear about your parents.

Thank you.

[noggins]

Other statistics are available.

https://www.theguardian.com/inequality/ ... e-earnings

[Bird on a Fire]

They're not incompatible. It'll be a long-tailed distribution. If your parents are wealthy, die without complex care needs, you can inherit more. But it's clear that that isn't the norm.

[noggins]

its the usual unsupported garbage statistics, could be true but missing crucial detail, could be true but very misleading, could be total bollocks.
Is it median total lifetime inheritance? The median payout for a will beneficiary?

[Gfamily]

I'm sure it's not alone in this, but Ireland has a 'lifetime inheritance' allowance for the recipients that is paid (by the executors) as the estate is distributed. The allowance differs depending on your relationship with the deceased - from about €335,000* to €16,250, with tax paid at 33% on any value over the allowance.

Ireland seems a very civilized nation

* there is no tax paid on inheritance to a spouse.

[Woodchopper]

They're not incompatible. It'll be a long-tailed distribution. If your parents are wealthy, die without complex care needs, you can inherit more. But it's clear that that isn't the norm.

It could come down to what is meant by inherit.

Parents can avoid the payment of any inheritance tax if they give away their assets seven or more years before they die. If they do that the children will only inherit a small amount after the parent dies. But it seems reasonable to also describe money transferred before death as an inheritance as well.

[sheldrake]

Other statistics are available.

https://www.theguardian.com/inequality/ ... e-earnings

Interesting bit

The IFS report found that on average, the inheritances of adults born in the 1980s will be worth as much as 14% of their overall lifetime earnings from work, compared to 8% for people born in the 1960s.

The thinktank found the median inheritance for those born in the 1980s is estimated to be £136,000, compared to £107,000 for those born in the 1970s and £66,000 for those born in the 1960s. This represents a more than doubling in the size of inheritances, at a time when incomes have barely risen for young adults compared to previous generations.

The 100-150k cited here as a median sounded more like what I would expect (roughly the value of a 3/4 bed middle class family home shared between 2 or 3 siblings).

[WFJ]

They're not incompatible. It'll be a long-tailed distribution. If your parents are wealthy, die without complex care needs, you can inherit more. But it's clear that that isn't the norm.

It could come down to what is meant by inherit.

Parents can avoid the payment of any inheritance tax if they give away their assets seven or more years before they die. If they do that the children will only inherit a small amount after the parent dies. But it seems reasonable to also describe money transferred before death as an inheritance as well.

Yes. There are a lot of people who believe inheritance tax is only something the stupid or unlucky pay.

[sheldrake]

Parents can avoid the payment of any inheritance tax if they give away their assets seven or more years before they die. If they do that the children will only inherit a small amount after the parent dies. But it seems reasonable to also describe money transferred before death as an inheritance as well.

I think it will be much harder to get statistics on that money transferred as a gift outside the 7 year window. I'd expect most stats on this come from the value of estates registered as probate is granted (and that's the value on which inheritance tax is calculated).

[El Pollo Diablo]

In terms of the state's knowledge of gifts donated in the seven years before the death of a parent, how is it managed? Is it a part of the probate stuff?

[Gfamily]

In terms of the state's knowledge of gifts donated in the seven years before the death of a parent, how is it managed? Is it a part of the probate stuff?

Yes*, there is a declaration made about gifts in excess of £3,000 in any of the previous 7 years.

* not necessarily technically true - but it'll be done as part of the process of valuation and dispersal

[sheldrake]

In terms of the state's knowledge of gifts donated in the seven years before the death of a parent, how is it managed? Is it a part of the probate stuff?

There are limits on how much can be gifted per year, in the seven years before death, without it being taxable. I think it's a few hundred quid per month, per recipient. I do not know how much investigation happens by the probate authorities to check whether people are declaring everything, but based on what I know about other taxes it's likely based on some kind of random sampling (with more attention paid to larger sums) and a lot of trust placed in solicitors if they are handling the probate application.

Transfers between spouses are exempt.

Very rich people ignore all this stuff and just set up some impenetrable Caribbean trust years in advance.

[plodder]

The thing that will readjust house prices is the thing that always readjusts house prices: interest rates.

https://www.theguardian.com/business/20 ... his-winter

(also high inflation will devalue debt but f.ck up savings, readjusting some of the inter-generational inequality)

[sheldrake]

I think the next time interest rates are adjusted upwards in any meaningful way could well be a horrific day of reckoning. Seems like a lot of people and companies with debts they can only service at the current extraordinarily low rates now (it seemed that way in 2005 to me tbf).

[plodder]

oh, for sure, obviously.

[sheldrake]

Central banks expect this too. One of the drivers behind the design of Central Bank Digital currencies being proposed (e.g. 'britcoin') is to provide 'other tools' to manage monetary policy, e.g. direct lending from the BOE to consumers so we can borrow with a lower markup over the base interest rate. Some of Andy Haldane's speeches on the BOE website on this topic are kind of scary though. e.g. units of currency that can be destroyed arbitrarily whilst still in somebody's account to encourage spending, or remove them from circulation to fight inflation.

[Hunting Dog]

Central banks expect this too. One of the drivers behind the design of Central Bank Digital currencies being proposed (e.g. 'britcoin') is to provide 'other tools' to manage monetary policy, e.g. direct lending from the BOE to consumers so we can borrow with a lower markup over the base interest rate. Some of Andy Haldane's speeches on the BOE website on this topic are kind of scary though. e.g. units of currency that can be destroyed arbitrarily whilst still in somebody's account to encourage spending, or remove them from circulation to fight inflation.

That sort of stuff, plus negative interest rates, or at least negative versus inflation, and some of the investment/pension scams where investors money has disappeared, are my motivation for keeping the house I rent out instead of selling it. It might not actually make % profits in the short/long term, but it's got a heck of lot of a better bet of still being there as some sort of realisable capital if I need it later

[sheldrake]

Absolutely. I'm baffled why an economist like Haldane can't see that batshit insane plans like that will just make people not trust the currency and trade out of it as soon as they can. His speeches read like he's become technically obsessed with ways of getting *really* low interest rates without considering human behaviour.