Housing market

[mandryka]

I can assure you that renting a house in a city which you own outright is lucrative, and the administration and maintenance really isn't a big deal (though MTD is likely to be a bit of a pain at first.) I speak from experience. However I think as boomers die many of their houses will be sold simply to pay IHT.

Another reason to sell it. If you don't then Jeremy Hunt or someone worse will get it .

 

[Mike Reed]

Steve mentioned NIMBY, but I lean towards being a BANANA (build anything near anywhere not adjacent)

I see what you've done there Mike.

Sorry but I've cocked it up (failed memory); BANANA should be 'Build absolutely nothing anywhere near anybody' An improvement, I think you'll agree.

5 years ago I had pretty extensive electrical work done to my maisonette. I now need it testing (mandatory every 5 years) and the cost from the same chap will be £204 incl. Actually, that's a good deal but how on Earth can that constitute a morning's/afternoon's work as presumably it's all labour?

I'm surprised that the property market generally simply faltered rather than slumped and now, in some places, appears to be inching ahead again. That the building shortage is the underlying factor here is not in doubt, but to me, the simple rules of economics fly in the face of further capital appreciation. Mortgage interest rates, unprecedented (?) deposit requirements and the sheer increase in cost of living/maintenance/insurance etc. mitigate against it.

Yes, there's lots of cash floating about and forming a sizeable chunk of sales, but nobody want's to make a poor investment, even though it's one's home, surely. Hard to fathom.

I readily admit that I've lived (blissfully ignorant at each time) through the better or best periods of house acquisition and feel that younger (comparative case) generations have a bleaker future in this area than any beforehand.

 

[paulfromcamden]

I think an equivalent of the Triple Lock will continue because people of my age forced it to happen in 2010 and your age bracket will force future governments to keep it in order to maintain decent pensions. Any government who kills it off will suffer at the polls.

True but reading Matt's post I think he was referring to people not being afford to put enough into their occupational pensions.

I suspect he's right. You need to put a hell of a lot of cash into a DC scheme to match the DB schemes of yore. How many people are going to retire with the £1m pot they need for £30k/year?

 

[paulfromcamden]

However I think as boomers die many of their houses will be sold simply to pay IHT.

Leaving your home to your kids increases your IHT allowance by £500k so long as your estate is under £2m.

(Another benefit of owning your home rather than renting.)

 

[matt j]

Yeah most normies don't need to worry about IHT, only a few London flash Harry's.

 

[Take5]

Leaving your home to your kids increases your IHT allowance by £500k so long as your estate is under £2m.

(Another benefit of owning your home rather than renting.)

Yes. That is of course for a single person.
a married couple can leave up to £1 million without inheritance tax if it includes the family home.

 

[Mick P]

True but reading Matt's post I think he was referring to people not being afford to put enough into their occupational pensions.

I suspect he's right. You need to put a hell of a lot of cash into a DC scheme to match the DB schemes of yore. How many people are going to retire with the £1m pot they need for £30k/year?

DC schemes are not fit for purpose and you won't get a decent pension even if you work to 100.

Triple lock will slowly increase pensions over the next 20-30 years and that can stop a load of hassle over means testing skint pensioners which helps no one.

 

[stevec67]

Yes you would an absolute idiot to sell your big house and there must be millions like you. So you will sit in it as it is going up in value but one day you and your better half will die and your kids will inherit it. End result is one extra house that was tied up for years is now released onto the market. Your death is just the same as building one house but the chances are a family of say 4 or 5 people will occupy the house. That will also filter downwards.

We are not a few oldies, there are millions of us and the combined effect of putting more money into the hands of the younger generation whist freeing up previously occupied property for them to occupy will put a reasonable downward pressure on house prices.

However the best thing is to build more houses in vast numbers because too many young people are living in cramped conditions which one does expect them to do.

The thing is that this trickledown approach doesn't work, any more than it does in economics. I'm not yet 60 and I'm not selling up anytime soon. Neither are my parents, and they are in their 80s. They plan to get a stairlift in their 4 bed house. When one of them dies, as one day they early must, there may be a rethink. However this will *not* be equivalent of building another house, because, guess what, the surviving one will need a place. So trickledown ain't working. Those of us with money are hanging into it, who knew.

I've said this before on here and I know it won't happen, but people like me will hang on to housing because there's no financial penalty. Don't say "Council tax" because that costs FA . It's a couple or three hundred a year over the tax on a poky terrace, and bear in mind the about 7 or 8% compound a year on a house value dwarfs the extra tax.

 

[stevec67]

True but reading Matt's post I think he was referring to people not being afford to put enough into their occupational pensions.

I suspect he's right. You need to put a hell of a lot of cash into a DC scheme to match the DB schemes of yore. How many people are going to retire with the £1m pot they need for £30k/year?

£1M for £30k a year? 3%? That's a crap return. if I put £1M in a shoebox aged 65 I can take £30k out every year until I'm 98. I'm not going to need £30k a year plus the state pension when I'm 98. How long do you plan to live?

 

[paulfromcamden]

£1M for £30k a year? 3%? That's a crap return. if I put £1M in a shoebox aged 65 I can take £30k out every year until I'm 98. I'm not going to need £30k a year plus the state pension when I'm 98. How long do you plan to live?

3% is about right for current annuity rates.

The snag in your plan is that Inflation erodes the value of your pot fairly substantially over three decades.

But you're right - an annuity is basically a wager with the provider that you'll live long enough to get your money back!

Either way, the point is you need an almighty wad of cash to match traditional DB schemes. And most peeps our age aren't going to have it and will be poorer in old age than the current crop of crumblies.

 

[stevec67]

3% is about right for current annuity rates.

The snag in your plan is that Inflation erodes the value of your pot fairly substantially over three decades.

But you're right - an annuity is basically a wager with the provider that you'll live long enough to get your money back!

Either way, the point is you need an almighty wad of cash to match traditional DB schemes. And most peeps our age aren't going to have it and will be poorer in old age than the current crop of crumblies.

Annuities are a waste of time at the moment. My shoebox is a better yield, even with inflation. My pension is currently running at 5-8% pa, that will do inflation plus more than 3% yield even before I start eating the principal.

 

[stevec67]

Better vote yes to the plan then.

If you can.

That's the thing, I already own the house I need, so I'm all right Jack. I don't need to back the plan, in fact I don't want any new housing. Sod the next generation, I'll carry on living in my nice spacious house for as long as I can before cashing it in for my pension.

 

[paulfromcamden]

Annuities are a waste of time at the moment. My shoebox is a better yield, even with inflation. My pension is currently running at 5-8% pa, that will do inflation plus more than 3% yield even before I start eating the principal.

Yeah straying off topic but I agree somewhat.

Though the other way of looking at it is that you trade some risk for guaranteed returns. 5-8% pa is great until a global financial crash wipes out a big chunk of your capital in your second year of retirement.

Luckily having T1 diabetes means I qualify for an 'enhanced' annuity because insurers assume I won't live to be old enough to fancy a Saga cruise. Every cloud and all that!

 

[mandryka]

3% is about right for current annuity rates.

The snag in your plan is that Inflation erodes the value of your pot fairly substantially over three decades.

But you're right - an annuity is basically a wager with the provider that you'll live long enough to get your money back!

Either way, the point is you need an almighty wad of cash to match traditional DB schemes. And most peeps our age aren't going to have it and will be poorer in old age than the current crop of crumblies.

If I put £1M into freehold property in SW19, I could get let's say £40K p.a. in rent back - maybe a bit more. Take off £3K for expenses if you find the tenant and manage yourself or £7K if you use an agent for everything. So renting does better than an annuity at 3%, and the capital value will likely grow. What's interesting is that the property would give you an easy rentier income for years - until you're old enough to sell and buy an annuity for a better rate.

 

[Minio]

How might they vote for it? In order to have somewhere to live, perhaps

It's a bit of a technical point, but if someone has nowhere to live how can they register to vote?

 

[mandryka]

Luckily having T1 diabetes means I qualify for an 'enhanced' annuity because insurers assume I won't live to be old enough to fancy a Saga cruise. Every cloud and all that!

One of my first jobs was introducing impaired life annuities to the UK life insurance industry - I'd seen it in America and wanted to bring it here. At the time there was very little morbidity data in the UK so it was a problem - good to see it's become standardised here.

 

[paulfromcamden]

If I put £1M into freehold property in SW19, I could get let's say £40K p.a. in rent back - maybe a bit more. Take off £2K for expenses if you find the tenant and manage yourself or £5K if you use an agent for everything. So renting does better than an annuity at 3%, and the capital value will likely grow. What's interesting is that the property would give you an easy rentier income for years - until you're old enough to sell and buy an annuity for a better rate.

Yep. Hence some people deciding BTL is better option that their crap pension. Can hardly blame them.

 

[paulfromcamden]

One of my first jobs was introducing impaired life annuities to the UK life insurance industry - I'd seen it in America and wanted to bring it here. At the time there was very little morbidity data in the UK so it was a problem - good to see it's become standardised here.

You're full of surprises! If I take out an enhanced annuity at some point I shall certainly raise a glass to you.

 

[Yank]

However the best thing is to build more houses in vast numbers because too many young people are living in cramped conditions which one does expect them to do.

Also subdividing large properties into multiple flats wherever appropriate...

 

[Darren L]

A bit like asking the American Indians if they wanted their lands concreted over for shopping malls.

A native American would have laughed and said, 'you can no more own the earth beneath your feet than own the sky above your head'
Then the greedy self entitled white man (with 'their' black men in chains) massacres the native 'savages' in the name of God and the King, hurrah!

A little off topic perhaps but sometimes reading some people's posts I find the greed and self entitlement quite sickening.