From City AM:
Homeowners over 50 hold three-quarters of the country’s housing wealth, according to new research from global property adviser Savills. These older homeowners, who have benefited from years of strong housing price growth, now own 75 per cent of all equity, with a total value of £2.8 trillion.
Not sure why they have such a low figure for equity, Savills reckon that the total value of all UK housing is £6.8 trillion and 75% of that is £5.1 trillion. This suggests total mortgages held by over-50s is £2.3 trillion.
Seeing as most over-50s will have bought over twenty years ago when houses were easily affordable, the original cost would have been (say) one-third of £5.1 trillion minus 10% deposit = £1.5 trillion, and in turn, just about all of this should have been paid off by now. So the £2.8 trillion is all second mortgages and buy-to-let mortgages.
Be that as it may, most of that £5.1 trillion is an unearned freebie whether people have remortgaged or not.
It's Not Just XL Bullies....
29 minutes ago
6 comments:
How much of the under 50's equity is actually from Mum/Dad/other relative over 50? A bit of mine is (reluctantly, sort of...)
It is not a freebie that they can spend though is it? (FWIW I am under 50 and did not buy when prices were low). If someone buys a house worth £x and inflation makes it worth £20x then they are really any richer.
It is sickening to me (and nice for me...:-) ) that I have 'made' about one third of the value of the business I have worked extremely hard to build, simply by sitting in my house for 31 years. Mind you a cousin of mine has made several million by the same process...
In other words I should have not bothered to try and build a genuine 'business' which employs people, provides a service for which there is a real demand and adds value but used the same capital appropriately geared up to sit on my arse and watch government, bureaucratic and homeownerist failure do the work for me.
(N.B. A lot of my business revenue arises (as does MW's IMHO) from other government failure leading to rent seeking opportunities for me and my peer group - the complexity of the tax code and the subsidies to investment managers via tax reliefs being the prime examples.
Oh, you can spend it alright. Particularly once the mortgage is fully paid off. The simplest way is to sell up, invest the proceeds and use the investment income to rent somewhere nearby.
Slightly more complicated is to sell up, buy a cheaper house in a less expensive area and invest the proceeds. That's basically what I have done.
More complicated still is to take out a new mortgage for the full value of your house, invest the proceeds of that and use the investment income to pay for the new mortgage plus your living expenses. Of course that is dependent on getting the lowest possible rate on the new mortgage and the best possible return on your investments. Not for the faint-hearted. Or the unlucky!
M, I think BOMAD is probably exaggerated. Dunno the real figures.
LF, well yes and no. The real total value of housing is unchanged, so total wealth is unchanged. Young people who have to buy now are clearly a lot poorer than those who bought twenty or more years ago when they bought. Ergo, if the former are poorer, the latter must be richer. The third possibility, that most of us are a bit poorer and the landlords and bankers alone are wealthier (leaving total wealth unchanged) is also correct but that's a bit more marginal.
L, yup, I bailed out of BTL by 2005 on the assumption that the benevolent UK government would put a stop to this unearned one way upward flow of wealth. Boy was I wrong!!
D, you can spent it by remortgaging or trading down. It's a bloody nice fall back to have. My younger sister is one of many who sold for ten times what she'd paid in London, moved to a cheap part of the UK and is now basically retired.
L, since I left London and sold my house, that bloody house has "earned" more money than I have in the increase of the value of the land alone. If I take into account the rent I would have received if I had not sold it but rented it out, the figure doubles.
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