Wednesday, 22 July 2015

Only one-in-three? That's a bit worrying.

From The Daily Mail:

More than one in three homes will be owned outright within a decade, as baby boomers pay off their mortgages, a new report reveals. By 2025, 10.6million families will be living mortgage free, up from 8.4million today, most of them in their sixties and seventies.

But millions of younger people will never get on the property ladder as analysis shows there will be more people will be forced to rent privately than paying off a mortgage within a decade.

I'm a bit baffled why people who bought more than 15 years ago haven't paid off their mortgages yet; (I bought in 1998 and it took me ten years, so I am already one of the lucky one-in-three.)

The graph also highlights just how unequal land ownership (as extrapolated from home-ownership figures) will be if their 2025 forecasts are correct:

* 16% of households (social tenants) will be paying enough rent to cover running costs, but little or nothing for the land. They are in a break-even.

* 24% of households will be private tenants who own no land and have to pay full market rent for the privilege of living.

* 24% of households will be mortgage payers; about half of these will own no 'land' i.e. the outstanding mortgage will exceed the value of the land under their house (as distinct from the house on it).

* 34% will own their homes outright.

Those 24% private renters will be renting from 4% of households and presumably these 4% households also own their own homes, so on average, they own about seven homes each. For sure, there is some borrowing secured against this, let's call it four units of land each.

So there we have it:

* The bottom 52% own no land.
* 12% own some land (but less than one unit)
* 34% own one unit of land.
* The top 4% own four units each.

So the time honoured KLN "Land Value Tax would be regressive" is complete and utter horseshit. Imposing LVT in itself would level the land monopoly playing field; and it can't be rocket science to use the proceeds to replace the most regressive/economically damaging taxes. A more equal society with "hard working people" keeping more of their earned income. What's not to like?


Random said...

The godsend to Georgists is that land ownership becomes more concentrated over time. Once it goes a fair bit below 50% we are in for a chance.
Lots of passive rent collected by the banks.
I've noticed another KLN, that "higher house prices fuel current account deficits which benefit us" no CADs are because eastern countries like China are saving in the currency due to following "export-led growth" IMF insanity that require them to save in the currency. Floating rates will eliminate any imbalances. If not it means there is manipulation.

Mark Wadsworth said...

R, yes

The Stigler said...

"I'm a bit baffled why people who bought more than 15 years ago haven't paid off their mortgages yet; (I bought in 1998 and it took me ten years, so I am already one of the lucky one-in-three.)"

I dunno. My last mortgage was an 18 year term and we only paid it off at about 17 years (it was 18 years because we didn't extend the term when we moved). But I'd like to think that there's at least a reasonable number of people with 2 incomes that would start clearing it off, or who got a redundancy cheque and took some off it. I'd certainly like to think that most people who took out a mortgage over 20 years ago took a look at the amount left and got shot of it.

The other thing is that some people see a mortgage as a fixed cost, like if they are paying rent. So, if they've got spare money, they stick it in a savings account or spend more on luxuries rather than knocking a bit off the capital. I've got friends who had £30K in savings and £100K of mortgage. Which is like lending yourself £30K and paying HBOS for the privilege.

Mark Wadsworth said...

TS, exactly. Once you have taken out a mortgage, by and large, the best form of "saving" is to pay it off as quick as possible - rather than giving HSBC the money to lend back to you at interest.

Lola said...

Yes, pay down your mortgage. But always have a few quid on deposit for that unforeseen emergency. Think of it like having a credit card you fund yourself.