35 ms·

Under-35s in the UK face becoming permanent renters, warns thinktank

142 points by temp 11y ago

intrasight 11y ago
Perhaps true of fashionable London, but hey, that's supply and demand. Tax the Russians and Chinese more, and those addresses would come down in price.
- kagamine 11y ago
  London, Manchester, Edinburgh, [add your location here] and all surrounding areas. The UK is expensive. Also from today's Guardian: http://www.theguardian.com/lifeandstyle/2016/feb/16/cost-of-raising-children-in-uk-higher-than-ever http://www.theguardian.com/lifeandstyle/2016/feb/16/cost-of-... with people in the comments claiming a nursery place is 1000 pounds a month which sounds right based on what friends tell me, compared to out capped ~£250 a month in Norway where everyone screams about high taxation but where the cost of living and quality of life are (probably) much higher.
  - s_kilk 11y ago
    Agreed, cost of living in the UK (not just London) is steadily climbing while quality-of-life is dropping through the floor.
    - raesene4 11y ago
      Interestingly that's not the cases everywhere in the UK. for example Dumfries and Galloway saw a 10% drop in property prices last year...
      - Xophmeister 11y ago
        Presumably because no one wants to live in Dumfries and Galloway. That's not meant to be a slant against the place -- I don't think I've ever been there -- but the price will drop if there's a decrease in demand with flat/rising supply.
  - koralatov 11y ago
    I live in Aberdeen, and you can definitely add Aberdeen and the surrouding -shire to that list. With the ongoing and very deep cutbacks happening in the oil industry, the prices have stabilised a little, but don't appear to have dropped any. From speaking with friends and acquaintances with whom I went to Uni, it appears there's a pretty predictable pattern to housing costs: anywhere there's reasonably plentiful work, prices are very high. It's cheap to live in Stoke-on-Trent or Ayr, but good luck getting a job that pays much more than minimum, if you can find even that.
  - deleted 11y ago
    [deleted]
  - raesene4 11y ago
    Whilst other areas are expensive London it totally in a league of it's own. Edinburgh (most expensive part of scotland) average property price £234k. London, average property price £642k Also people in Scotland and areas like Manchester can more easily get on the property ladder by buying in cheaper nearby areas. for Edinburgh places like West Lothian (average price £164K) make a much easier starting point. Heck with improving internet access, if you can do your job remotely the western isles are nice and cheap (average price around £100k) For me the UKs property market is heavily split between London and the south east and "the rest of the country", a lot of the stories about expensive UK property don't seem to cover those aspects.
    - vixen99 11y ago
      its own!
    - TheOtherHobbes 11y ago
      Prices in many parts of the UK have been more or less static since 2008, and in some cities they've actually fallen. The hot spots are all "capital" cities for their catchment areas. >if you can do your job remotely the western isles are nice and cheap I've considered this, but I decided that moving to Europe is a better idea, for cultural and political reasons. Also, it doesn't rain nearly as much; climate change is going to flood/rot a lot of the UK's housing stock and infrastructure over the next few decades, and I'd rather be somewhere hotter and drier.
  - m-i-l 11y ago
    It is an average of £28,000 per year to send two children to nursery in London [0]. In stark contrast, the cheapest house in central Bradford was £29,000 [1], and last year 120 homes in Liverpool were sold (with conditions attached) for £1 each [2]. [0] http://www.thisismoney.co.uk/money/bills/article-2385465/How-cut-childcare-costs-vouchers-work.html http://www.thisismoney.co.uk/money/bills/article-2385465/How... [1] http://www.theguardian.com/uk-news/2015/sep/02/housing-market-gulf-salaries-house-prices http://www.theguardian.com/uk-news/2015/sep/02/housing-marke... [2] http://www.bbc.co.uk/news/uk-england-merseyside-34474378 http://www.bbc.co.uk/news/uk-england-merseyside-34474378
- yardie 11y ago
  No, they'll just pay the tax while making even more money. For a lot of rich in totalitarian countries the UK, and the US, is their bolthole.
  - Joeboy 11y ago
    Why will taxing them mean they make more money? And also why is that a problem? Even if it doesn't improve the housing situation it makes sense to maximise tax income from rich foreign investors. Disclaimer: I don't know anything about anything and it probably isn't that simple.
- tomp 11y ago
  > that's supply and demand. It's not just supply and demand. The government is heavily subsidising house purchasing. This essentially means that I'm paying (through high taxes) for homes that I don't live, for people who can't afford them.
  - m-i-l 11y ago
    > The government is heavily subsidising house purchasing... I'm paying (through high taxes) for homes that I don't live How so? Taxes on property purchases, especially in London, generate significant income for the government - according to http://www.standard.co.uk/news/london/stamp-duty-burden-on-london-home-buyers-spirals-to-a-record-3-billion-a2958726.html http://www.standard.co.uk/news/london/stamp-duty-burden-on-l..., London house buyers paid more than £3 billion in stamp duty in 2014, with one London borough (Westminster) contributing more than Scotland, Wales and Northern Ireland put together, and the most expensive London property (in Belgravia) raising more than the whole of Liverpool.
    - tomp 11y ago
      I would assume that most of the subsidies are for properties that have very low stamp duty. However, if it's true that the subsidy exactly offsets the stamp duty, then I agree that this would be amazing - basically a tax subsidy for the poor.
    - cbeach 11y ago
      The government (with Right to Buy, Help to Buy, Help to Buy ISAs etc) is subsidising house purchases, but only for first-time buyers. So it is skewing the market in their favour as opposed to landlords and speculators. That's a good thing in my opinion.
      - tomp 11y ago
        Not really, as I wrote above, it's using my money to pay for other people's homes. It's also increasing the demand for housing, which in turn pushes the prices higher, encouraging speculators and helping them.
- workusername 11y ago
  I have no choice but to vote Brexit in the hope of reducing the population and hence demand, as there is no hope of sufficient and suitable supply.
herge 11y ago
Hey dang, if this post doesn't get flagged already, perhaps change the link to the original Telegraph article (http://www.telegraph.co.uk/finance/property/news/12155466/Only-the-rich-and-elderly-will-own-homes-within-a-decade-thinktank-warns.html http://www.telegraph.co.uk/finance/property/news/12155466/On...) instead of the vice news aggregation page.
- dang 11y ago
  Good catch. (It's better to email hn@ycombinator.com, though, because it's pretty random which of these comments we see.) We changed the URL from http://www.vice.com/en_uk/read/hangover-news-observer-proposal http://www.vice.com/en_uk/read/hangover-news-observer-propos... to the Guardian article it points to, which seems marginally more substantive than the Telegraph one. Submitters: when posting, please follow the HN rules, which ask: Please submit the original source. If a post reports on something found on another site, submit the latter. This does take a little diligence, but only a little, and the benefit to site quality is high. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
JamesBaxter 11y ago
I feel like I'm burning money renting in London right now. I tried renting somewhere really cheap to save money for a deposit but it made me miserable. Now I spend a lot more and only have to share with one person but I can't save.
- deleted 11y ago
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- tomp 11y ago
  The funnies thing is the CPI (inflation index). The weight it assigns to housing/rent is about the same as the weight for "restaurants and hotels", and lower than "recreation and culture" and "transportation". While this might be true for the houseowners and for non-Londoners, for me rent represents about half (!) of my monthly expenditures. Renting "cheap" doesn't really help - even moving a few zones out of the center, rents would for 10-20% at most.
  - stegosaurus 11y ago
    Looking at the CPI list now, it appears that the weighting of housing is broken. It seems that rent is included whilst mortgage interest and imputed interest on equity is not. The split in the UK is very roughly 33% rental, 33% owned outright, 33% owner occupied. What that means is that essentially all the other items have roughly triple the weighting that they should - in a rough sense it ends up showing the housing costs of 1/3 of the population, whilst showing all other consumption of 100% of the population.
colinramsay 11y ago
The UK is bringing in a second home tax: http://uk.reuters.com/article/uk-britain-budget-housing-idUKKBN0TE1OZ20151125 http://uk.reuters.com/article/uk-britain-budget-housing-idUK... http://www.bbc.co.uk/news/uk-scotland-scotland-politics-35113952 http://www.bbc.co.uk/news/uk-scotland-scotland-politics-3511... In the town where I live there are a lot of summer homes that are unoccupied in winter. In London, there are obviously a lot of homes that the rich use when they are visiting. This is an extravagance that is affecting the UK as a whole and a second home tax might help a little. I don't think that the above measures go anywhere near far enough though.
- yardie 11y ago
  Florida makes its money primarily from income tax. If it's your primary residence you can get some tax relief. If its your vacation home you pay the full weight. It hasn't made an appreciable difference in housing prices. Lots of foreign owners know they'll have to cough up a few thousand dollars every year out of their millions of dollars in assets.
  - toomuchtodo 11y ago
    Florida has no income tax. It has a higher sales tax to compensate (and other tourist-related taxes, such as on hotels and rental cars). Our property taxes are very, very low compared to other states though. You're correct in that you receive an exemption if the property is your primary residence, but you overstate the burden of property taxes on >$1MM residences (its really not that high). People purchase a high dollar value home in Florida because there is no limit to the value protected from creditors (except notes tied to the house) in the event you're sued or declare bankruptcy (1/2 acre of land or less within a municipality, 160 acres if you're in an unincorporated area). Source: I'm a Florida resident.
    - lanaius 11y ago
      Cook County sales tax is 10.25%. If you're in downtown Chicago there is a pretty wide area in which restaurants collect an additional 1% tax. And of course there's still income tax. I wish Florida still counted as "higher" sales taxes.
clavalle 11y ago
Is this the New Feudalism? The super wealthy buying property from all over the world literally for rent seeking? Will the world become a Company Town? Is this desirable? Inevitable?
- nextos 11y ago
  The situation is completely insane. For example, Cambridge used to be a relatively affordable place. Now, rents for 1 bed 50 m^2 flats are in the range of, at least £1200 per month (climbing at a rate of ~£100 / year). It's sad, because it's a good place to do science in, but everything is really expensive. I come from Scandinavia, and things work much better there and are miles ahead in terms of affordability.
  - seivan 11y ago
    How is Scandinavia better? Queue for years or get scammed on Blocket? I prefer a free market. At least people can rent out in UK and not get in trouble with the Co-op that only allows one year at a time.
    - nextos 11y ago
      I was referring to the Copenhagen area in particular. It's a nice balance between salaries and house prices. Malmö is even better. Since housing is usually taking the majority of your income, this has a huge impact on the quality of life. As a postdoc, you can easily buy a house in Copenhagen. Or you can rent, at it's barely 1/3 of your salary. In Cambridge, an equivalent flat is more like 1/2-3/4 of your salary. Also the rental market in the UK is really wacky with regards to tenant protection.
      - cplanas 11y ago
        I don't think renting is better in CPH than in Stockholm. Right now I'm paying 10.000DKK (1500USD) for a one bedroom apartment, not in the center (NV). It was the only option that didn't involve any shady stuff like no-contract or not being able to register myself in the apartment. Most of my friends live doing one of those, or renting a room for around 5.000DKK (750USD).
deleted 11y ago
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Shivetya 11y ago
Well one issue that has been pointed out by people who work in this area is the program Help to Buy. Many have claimed that this artificially raised prices of homes because of the guarantees and money built in the system. The solution as with Vancouver is to ease the cost of building new homes and possibly using targeted property tax relief of those you are seeking to encourage into home ownership. One other issue is apparently you can actually get a discount on taxation on your other homes if they are furnished because there seems to be some relation to the number of days it is occupied; unless I am just reading that wrong. If so this one area that needs adjusting, reducing tax because you don't actually spend time in the home but it otherwise is unavailable to others should not incur a benefit and if anything encourages buying up second and third homes
jimrandomh 11y ago
This same pattern plays out in most places that're desirable to live. People want to move somewhere, demand for housing goes up, and prices rise because those people compete against each other for the existing housing stock. Ordinarily, this would be addressed by new construction: build enough housing units to meet the demand, and prices will be reasonable. But construction is controlled by local governments through zoning law, and local governments are controlled by incumbent landlords who want the prices to skyrocket to unreasonable levels. So young people end up paying huge amounts of money to established landlords, while landlords distort the narrative to blame the problem on anything and everything except the lack of construction.
- zdkl 11y ago
  You could do similarly vague postulations about the effect of foreign buy-in of your local real-estate, or the relation between attractiveness/cost per unit of places where replacing existing buildings with denser housing is not desirable for many reasons (historical city centers spring to mind). (EDIT: Speaking as someone who appreciates european-style preserved city centers, even though they do come with their own bag of problems)
  - jimrandomh 11y ago
    High prices mean there is a shortage. The solution to shortages is to create more, until there is no longer a shortage. Anything else is lame excuses and class warfare, and it has gotten old.
    - iheartmemcache 11y ago
      It's a chicken-egg problem. Desirable places tend have an ecosystem that offers a high quality of life (as agreed upon by the demand-side of the market at the time). Local coffee-shops, a decent arts and music scene, acceptable public transportation and proximity to work (sociologists have conducted studies which find duration of commute is a direct function of quality of life) are pre-existing features which exist within the those high-demand/low-supply areas. You can gentrify and build out (i.e. Williamsburg, Oakland) gradually building those ecosystems out with it, but in high-demand places like NYC and SF which have a fixed area of land, you can only build up a certain amount in certain regions, and only build out a certain radial length before your commute becomes 90 minutes. Zoning laws controlled (as you mentioned) by incumbent lessors/landlords and NIMBY's who currently own property (and don't want a new co-op or apt complex housing to go up because they'll lose their scenic view) contribute to this problem. "Create more" in those spatially limited/legally restricted regions is difficult. You can region shift and build out there (ie. there are tons of homes available in Kansas one could buy for 3 months of an average SV engineer's salary) but it lacks the ecosystem that, say, SF offers. In places like greater London it's an even bigger problem due to even higher density (you can't really build out into the English Channel).
scotty79 11y ago
Progressive tax on how much estate you own could help by incentivising some owners to sell their houses the can't or don't rent. Of course that would cause estate value to drop which is something apparently nobody wants except for poor people (99%).
- pc86 11y ago
  I am not in the 1% by either the income or wealth metrics, and I can assure you that a drop in housing prices would do nothing but hurt my family's net worth.
  - thaumasiotes 11y ago
    What use are you getting from the nominal value of your house?
    - pc86 11y ago
      Well I did say net worth, not cash flow or credit or anything like that. But a sudden drop in the value of your primary residence can cause issues, including: - Difficulty obtaining a loan if you wish to use the home as collateral (Second mortgage or HELOC) - Inability to sell the house if you owe more than the home is worth If you have no interest or need to move and have no need to use your home's equity to obtain capital, it's just a number in a spreadsheet and is largely unimportant.
ksec 11y ago
I may get downvoted into oblivion, but i will still voice it out. I read the US exported their Inflation of QE to other countries. And then gets the Chinese to spend buying property all around the world. Most government are reluctant to act due to worry of popping another housing market like US 2008. But it is good finally some* are taking notice, given we have 3 HN article the same week on property pricing. But it is likely too late. Those who are now 25 may have some hope to have some things sorted in their prime years. Those who are in their 30s like me will likely have to battle hard just for survival. For those who don't know where this is going, take a look at Vancouver, Sydney, London, or a place call Hong Kong where many people could only afford to live in 10m2 "flat". I maintain that unless there is social housing program in place to guarantee every citizen a place for basic living, housing should NOT be an investment options or should at least be heavily taxed / regulated.
- dang 11y ago
  > I may get downvoted into oblivion, but i will still voice it out. Please edit this kind of thing out of HN comments. It's against the site guidelines (check the bottom of https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html), and tarnishes your point.
- contingencies 11y ago
  HK's answer, post-bubble, was apparently nearly free loans. Now that it's losing business to Shanghai and Guangzhou, and being flooded by mainlanders, we'll see how that goes ...
erispoe 11y ago
The problem faced by the UK, and many other countries, is not that people are renters, it's that they have diminishing financial security. Swiss people rent more than any other people in Europe (only 35% homeownership rate) but they are relatively more affluent and being a renter does not impair their ability to save and accumulate assets. Spanish people own their home in a large proportion and I'm sure Swiss people wouldn't trade with them. Let's not conflate the means with the end. The goal is to make people financially secure, homeownership can be a mean to that but it's far from automatic. In fact homeownership can be a consequence of financial security. Your home is an incredibly illiquid asset, and you are likely to need to liquidate it at the worst time.
- x5n1 11y ago
  I attribute their affluence to their direct democracy. When you delegate decision making to a oligarchy, they find ways to help their friends nickel and dime you and make you into serfs that are ever easier to exploit for their personal benefit.
- clock_tower 11y ago
  > homeownership can be a consequence of financial security. _The Old Money Book_ recommends this: first get an income stream (outside of your salary), then divert some of it to pay for a house.
- tomwalker 11y ago
  I agree that homeownership is not the be all and end all for financial security and Switzerland is a great example. I think the biggest concern is that many young people today will not enjoy the same standard of living as their parents in many categories such as job security, retirement prospects, child bearing, etc
colinramsay 11y ago
In certain parts of the UK people are rejecting the norm and opting to live in boats, caravans, yurts and the like. Many of these people live outside the standard economy and work on a semi-barter system, trading skills, and some are artists who are working with modern systems like Etsy and the internet at large to sell their wares. I think that this is going to become increasingly common over time but it does tend to be younger people doing this; it begs the question of what these people are going to do in their old age when their lifestyle choices means that their savings (and pension contributions) are minimal.
- wrong_variable 11y ago
  Here Here ! As a recent graduate with a cushy programming job in london - I have been thinking strongly living in a van ! Its not because I cannot afford it etc. I hate handing my hard earned money to entitled baby boomers who couldn't get past grade 5.
- contingencies 11y ago
  In London, cheeky people used to live on canal boats, but even that has become expensive. There are a few great documentaries out there on living small, though mostly US-focused, and mostly "avoid housing regulations by living in a trailer-mounted mini house and calling it a vehicle", there are some interesting exceptions.
Garvey 11y ago
Is there anything wrong with that? I lived in Italy for around 2 years and everyone there seemed perfectly happy with renting. According to this article from The Guardian, it would appear to be similar in France. http://www.theguardian.com/money/2016/jan/14/why-are-brits-so-obsessed-with-buying-their-own-homes http://www.theguardian.com/money/2016/jan/14/why-are-brits-s...
- Futurebot 11y ago
  Local economic conditions (incomes and rising rents especially) and renter laws aren't equal everywhere. Here in NYC market rate renters can expect 4-10% rent increases a year and can be tossed out for almost any reason whatsoever. In SF they have the Ellis Act. My understanding is that in places like Germany, where renting is common, things are very different (renters are some kind of partial owners of the places they rent, and enjoy much greater protections than in other places.) In the most difficult US markets, ownership is a lifeboat on a wild economic sea if you can come up with a downpayment or, even better, can buy outright, as rents tend to grow much more slowly than property taxes. This is doubly true if you own an apartment rather than a house and can just pay a maintenance fee rather than dealing with paying for it yourself.
  - iheartmemcache 11y ago
    The German renting market is really interesting. Some reasons contributing to such a low owner rate include, 1: favorable laws in rent control - preventing more than 15% over 3 years (~4% per annum), negating the need to buy to hedge against the risk of huge rent increases[1], 2: the tax policy is structured such that home-owners do not get to deduct things like mortgage interest payments, unlike in the US and Spain, 3: the German banks are inherently risk-adverse and as such have historically been pretty stringent when it comes to lending, 4: in tandem with (3) , there are no government subsidies or programs like the FHA which offers banks the ability to offer mortgages to people with only 3% down. [1] http://fic.wharton.upenn.edu/fic/papers/03/0301.pdf http://fic.wharton.upenn.edu/fic/papers/03/0301.pdf, Banks' Advantage in Hedging Liquidity Risk: Theory and Evidence from the Commercial Paper Market
  - 11y ago
matthewcford 11y ago
Well forget ever buying in London, my rent alone in central London is £2656 ($3800) a month. This flat would be more than £565,000 to buy. How anyone saves for a deposit, while paying rent - without help from their parents is beyond me.
- stuxnet79 11y ago
  WTF!!? & here I thought Toronto was bad. I'm assuming rents don't get any higher than this right? You must earn a lot although I'm certain the rent erodes a significant amount of your take home, after tax pay.
  - robk 11y ago
    That's like 50th percentile for central London for a 2 bed flat.
    - twic 11y ago
      But central, rather than inner. Of course it's eyewateringly expensive to live in central London. The way London works is that people live in the bits outside the centre, and commute in for work and leisure. People who live in the centre are a bit of an anomaly.
  - martinald 11y ago
    Not expensive at all. Decent standard one beds in an ok area in zone 3 can cost £1500/month easily (about 10km from the centre of London).
- keville 11y ago
  > How anyone saves for a deposit, while paying rent [...] is beyond me. I couldn't agree with this sentiment of confusion more -- especially living in San Francisco, even with a reasonably healthy wage.
- contingencies 11y ago
  My answer to London was to find a cheap, multi-bedroom flat and sublet the rest. After that I wound up paying about £300/week, or under half what you pay. 2009 Whitechapel, near Brick Lane.
spangry 11y ago
Same problem in Australia. Just to define some terms for non-Australian folk: - Negative gearing: A deduction received on net rental income losses (e.g. I'm a landlord who pays $100 in loan interest, receives $60 in rent, so I claim a tax deduction of $40) - Capital gains: I buy a house worth $100,000. A few years later I sell it for $260,000. I've made a capital gain of $160,000. The under 30s age group receive: - 1% of total negative gearing tax benefits, whereas the 50+ age group receive 55% (http://www.macrobusiness.com.au/wp-content/uploads/2016/02/ScreenHunter_11535-Feb.-16-08.09.jpg http://www.macrobusiness.com.au/wp-content/uploads/2016/02/S...) - 2% of capital gains tax benefits, whereas the 50+ age group receives 76% (http://www.macrobusiness.com.au/wp-content/uploads/2016/02/ScreenHunter_11536-Feb.-16-08.10.jpg http://www.macrobusiness.com.au/wp-content/uploads/2016/02/S...) It's inter-generational theft perpetrated by the baby-boomers, aided and abetted by tax policy. These tax breaks also cause of financial system instability and capital mis-allocation. The tax breaks are regressive: the top 30% highest income households receive 62.2% of total negative gearing tax breaks (http://www.macrobusiness.com.au/wp-content/uploads/2015/04/ScreenHunter_7244-Apr.-28-13.45.jpg http://www.macrobusiness.com.au/wp-content/uploads/2015/04/S...). Personally, I think the main issue is that the distortionary effect of untaxed land rents are greatly amplified by capital gains tax exemptions. That, and housing market supply inelasticities due to restrictive zoning laws, property transaction taxes (i.e. stamp duty), drip fed land releases by local governments etc. Eat the young!
- PebblesHD 11y ago
  The whole situation in Australia is infuriating at the moment. I feel like I'm in a reasonable position for a young professional but I have zero chance of getting any sort of housing security with the way things are now. Between bills and rent at the moment it would take me years to save the amount needed for a deposit, and even then I'd only be able to borrow enough money for a house more than an hour and a half's commute from work each way, which totally defeats the point. I've been willing to forgo a short travel time for a reasonable place to live for years, and it's really starting to get to me. Sadly, remote work is also out of the picture thanks to the sad state of my 'ADSL2' that tops out at 2mbit/s... It's just not a great place to be right now
thesimon 11y ago
Grace Dent writes for the Independent how "for the average person, marrying into property will be your best shot at 'owning it'" http://www.independent.co.uk/voices/the-housing-crisis-is-creating-sharp-elbowed-husband-hunters-a6875576.html http://www.independent.co.uk/voices/the-housing-crisis-is-cr... Crazy. But to be honest, why is everyone focused on buying a house? Does everyone want to own a house, 1.7 kids and a car or where does the need to buy instead of renting come from? Maybe I'm missing something, but the flexibility of renting seems a lot bigger advantage than the small advantages of owning a house.
- cmdrfred 11y ago
  Depends I guess, for me I want to lower my cost of living in old age and not paying rent is a big factor in that.
  - NikolaeVarius 11y ago
    You would probably come out far ahead taking the money you would have paid on the down payment and house maintainance and invested in the stock market. Tends to be much MUCH better return wise versus homes.
    - laurencerowe 11y ago
      In the US, mortgage interest is tax deductible whereas rent is not. The more you earn (and thus the higher your tax bracket) the more this subsidy is worth. The other big factor is inflation. Rent will increase every year while your mortgage payments will stay at the same nominal value. Admittedly inflation is much less of a thing now, but in the past it made owning a home hugely more worthwhile. Great calculator to explore the various paramaters here: http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html http://www.nytimes.com/interactive/2014/upshot/buy-rent-calc...
    - cmdrfred 11y ago
      Better returns directly on the money (given historical averages hold) yes. You also have to consider I'm locking in my monthly housing cost in 2016 prices (until I pay off the mortgage that is, then I merely have to pay property taxes) also I can make improvements to my standard of living that renters can't. If I want a hot tub, I simply install one rather than having to find an apartment with one and paying a massive monthly premium for it. Rent for a decent one bedroom in my area is $1200 a month, my mortgage is $1120 (taxes and insurance included) and that gives me 3 bedrooms and a yard. For me this was the better choice.
mschuster91 11y ago
Hmmm... biggest shortage of housing is in the London area, I guess? This is due to people parking their funds in real estate because interest rates anywhere in the stock market are basically zero when compared to real estate, and because transferring ownership of an estate holding company is a pretty nice way to launder/transfer money. I'd propose a law that makes it illegal for an estate owner in housing-crisis areas to leave a home un-occupied for over 4 months a year; if this is not the case the state is allowed to choose an arbitrary person and let him rent the apartment at a rate similar to the non-luxury-housing market. In Germany, in some areas this law is already in effect (e.g. http://www.hamburg.de/contentblob/3999156/data/hamburgisches-wohnraumfoerderungsgesetz.pdf http://www.hamburg.de/contentblob/3999156/data/hamburgisches...). The legal foundation for these laws is in the Grundgesetz: "Eigentum verpflichtet. Sein Gebrauch soll zugleich dem Wohle der Allgemeinheit dienen.", which basically means that if you have the privilege of owning something, you have to contribute to common wealth with it.
- autotune 11y ago
  How do you determine that someone has occupied the home before 4 months? How long should the length of the stay be? If some ridiculously rich person has a bunch of houses, this would mean they just need to visit each house once every 4 months, or send someone to do it, which for the people lucky enough to own a home in London I can't imagine being difficult.
  - mschuster91 11y ago
    > How do you determine that someone has occupied the home before 4 months? Make the owner register his primary residence. I forgot not every country has something like we Germans have with the Meldewesen. Seriously, using utility bills as proofs of residence... what a load of ...
- paulddraper 11y ago
  So...you can't have a summer home? Ever? And if no one uses a timeshare over the winter they lose it? Taken literally, this seems horrible. I'm assuming that the tenant gets rights and you can't just walk in and kick them out.
gozur88 11y ago
When I graduated from college you'd see exactly this sort of article in the paper every so often. And indeed, at the time the 20% downpayment for a house was going up faster than I could save money. And then the housing market collapsed and I bought a house. Over long periods of time housing only goes up about as fast as inflation. Younger people in the UK are not facing "becoming permanent renters". They're just facing a bubble, for the time being, that will produce lots of bargain prices when it pops.
- eterm 11y ago
  That's not true, certainly not in the south east. The bubble never burst here, house prices have been growing faster than inflation for decades. Politically it is now impossible to let it burst, so all sorts of schemes are made up to keep it going. Edit to add: a typical 2 bedroom terrace or end of terrace now costs between £350-500k ($500-700k) here. These are not large homes, don't have luxurious gardens, don't have a garage at all. This isn't even London, this is just outside London in the south east. And wages haven't kept up. Imagine San Francisco house prices without San Francisco wages, that's why people are talking about a generation of renters.
  - mjevans 11y ago
    This concisely points out exactly why we never recovered from the great recession of our time. It is politically beneficial to obey the rich paying for their campaigns, and placate the voters, then to deliver the harsh correction for bad behavior that a controlled lancing of the bubble would involve.
  - deleted 11y ago
    [deleted]
    - gte525u 11y ago
      The GP is talking about the UK.
      - 11y ago
bane 11y ago
Here's an oldie but a goodie that I refer people to on this topic http://assayviaessay.blogspot.com/2014/04/rent-or-buy.html http://assayviaessay.blogspot.com/2014/04/rent-or-buy.html
guy_c 11y ago
Firstly there seems an inherent bias that young people want to be homeowners and not being a homeowner is bad for people. My first reaction to "Under-35s in the UK face becoming permanent renters, warns thinktank" is, "So what?". We are not talking about people being homeless. Also I think lots of these reports never make any mention of demographic changes over time. The 35 year old of 1998 is likely to be a very different person to the 35 years of 2026. In the 18 years since 1998 we have seen university attendance increase from 25% to 33%. We have seen the cost of university education increase, so most graduates now carry more debt. I suspect we've seen an increase in the average age of marriage. Probably also a reduction in marriage and number of people that are having children by 35.
pcardh0 11y ago
Thank god I am 48.
pcardh0 11y ago
Thank god I am 48.
boredatnight12 11y ago
Phew. Wait! I'm still renting a flat.
kamaal 11y ago
Don't want to rub salt of people's wounds here, but remember when you guys screamed on the top of your voices that real estate was a bad instrument. This is basically what happens when you follow that line of thinking, when your demands start popping up later in life you realize you could have easily made those investments a few years back, but you didn't. And may be even watch people who made far lesser than you in salary having better house than you. May be if these under-35's had saved some money instead of blowing it all on "enjoying their lives", "travelling the world" and on those new iPhone models every year they would have a decent sum for a downpayment somewhere in the out skirts. Also note that most landlords themselves probably went through hell to build themselves this portfolio for their rainy days. If you think you can't buy yourself a home, you need to drastically rethink your priorities. Because like it or not, anytime is the best time for these things. Its about timing, location and money. Earlier you buy, the better place and lesser price you get to buy. For the perspective of the next decade now is the right time. You an tax the rich as much as you won't, no matter anywhere in the world. Most of these people will never come to own a home. The true reason why these people can't afford a home is not because its expensive, but because they refuse to commit themselves to any kind of a long struggle, that doesn't interfere with the privileges they think they are entitled too.

142 points by temp 11y ago

Perhaps true of fashionable London, but hey, that's supply and demand. Tax the Russians and Chinese more, and those addresses would come down in price.

kagamine 11y ago
London, Manchester, Edinburgh, [add your location here] and all surrounding areas. The UK is expensive. Also from today's Guardian: http://www.theguardian.com/lifeandstyle/2016/feb/16/cost-of-raising-children-in-uk-higher-than-ever http://www.theguardian.com/lifeandstyle/2016/feb/16/cost-of-... with people in the comments claiming a nursery place is 1000 pounds a month which sounds right based on what friends tell me, compared to out capped ~£250 a month in Norway where everyone screams about high taxation but where the cost of living and quality of life are (probably) much higher.
- s_kilk 11y ago
  Agreed, cost of living in the UK (not just London) is steadily climbing while quality-of-life is dropping through the floor.
  - raesene4 11y ago
    Interestingly that's not the cases everywhere in the UK. for example Dumfries and Galloway saw a 10% drop in property prices last year...
    - Xophmeister 11y ago
      Presumably because no one wants to live in Dumfries and Galloway. That's not meant to be a slant against the place -- I don't think I've ever been there -- but the price will drop if there's a decrease in demand with flat/rising supply.
- koralatov 11y ago
  I live in Aberdeen, and you can definitely add Aberdeen and the surrouding -shire to that list. With the ongoing and very deep cutbacks happening in the oil industry, the prices have stabilised a little, but don't appear to have dropped any. From speaking with friends and acquaintances with whom I went to Uni, it appears there's a pretty predictable pattern to housing costs: anywhere there's reasonably plentiful work, prices are very high. It's cheap to live in Stoke-on-Trent or Ayr, but good luck getting a job that pays much more than minimum, if you can find even that.
- deleted 11y ago
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- raesene4 11y ago
  Whilst other areas are expensive London it totally in a league of it's own. Edinburgh (most expensive part of scotland) average property price £234k. London, average property price £642k Also people in Scotland and areas like Manchester can more easily get on the property ladder by buying in cheaper nearby areas. for Edinburgh places like West Lothian (average price £164K) make a much easier starting point. Heck with improving internet access, if you can do your job remotely the western isles are nice and cheap (average price around £100k) For me the UKs property market is heavily split between London and the south east and "the rest of the country", a lot of the stories about expensive UK property don't seem to cover those aspects.
  - vixen99 11y ago
    its own!
  - TheOtherHobbes 11y ago
    Prices in many parts of the UK have been more or less static since 2008, and in some cities they've actually fallen. The hot spots are all "capital" cities for their catchment areas. >if you can do your job remotely the western isles are nice and cheap I've considered this, but I decided that moving to Europe is a better idea, for cultural and political reasons. Also, it doesn't rain nearly as much; climate change is going to flood/rot a lot of the UK's housing stock and infrastructure over the next few decades, and I'd rather be somewhere hotter and drier.
- m-i-l 11y ago
  It is an average of £28,000 per year to send two children to nursery in London [0]. In stark contrast, the cheapest house in central Bradford was £29,000 [1], and last year 120 homes in Liverpool were sold (with conditions attached) for £1 each [2]. [0] http://www.thisismoney.co.uk/money/bills/article-2385465/How-cut-childcare-costs-vouchers-work.html http://www.thisismoney.co.uk/money/bills/article-2385465/How... [1] http://www.theguardian.com/uk-news/2015/sep/02/housing-market-gulf-salaries-house-prices http://www.theguardian.com/uk-news/2015/sep/02/housing-marke... [2] http://www.bbc.co.uk/news/uk-england-merseyside-34474378 http://www.bbc.co.uk/news/uk-england-merseyside-34474378
yardie 11y ago
No, they'll just pay the tax while making even more money. For a lot of rich in totalitarian countries the UK, and the US, is their bolthole.
- Joeboy 11y ago
  Why will taxing them mean they make more money? And also why is that a problem? Even if it doesn't improve the housing situation it makes sense to maximise tax income from rich foreign investors. Disclaimer: I don't know anything about anything and it probably isn't that simple.
tomp 11y ago
> that's supply and demand. It's not just supply and demand. The government is heavily subsidising house purchasing. This essentially means that I'm paying (through high taxes) for homes that I don't live, for people who can't afford them.
- m-i-l 11y ago
  > The government is heavily subsidising house purchasing... I'm paying (through high taxes) for homes that I don't live How so? Taxes on property purchases, especially in London, generate significant income for the government - according to http://www.standard.co.uk/news/london/stamp-duty-burden-on-london-home-buyers-spirals-to-a-record-3-billion-a2958726.html http://www.standard.co.uk/news/london/stamp-duty-burden-on-l..., London house buyers paid more than £3 billion in stamp duty in 2014, with one London borough (Westminster) contributing more than Scotland, Wales and Northern Ireland put together, and the most expensive London property (in Belgravia) raising more than the whole of Liverpool.
  - tomp 11y ago
    I would assume that most of the subsidies are for properties that have very low stamp duty. However, if it's true that the subsidy exactly offsets the stamp duty, then I agree that this would be amazing - basically a tax subsidy for the poor.
  - cbeach 11y ago
    The government (with Right to Buy, Help to Buy, Help to Buy ISAs etc) is subsidising house purchases, but only for first-time buyers. So it is skewing the market in their favour as opposed to landlords and speculators. That's a good thing in my opinion.
    - tomp 11y ago
      Not really, as I wrote above, it's using my money to pay for other people's homes. It's also increasing the demand for housing, which in turn pushes the prices higher, encouraging speculators and helping them.
workusername 11y ago
I have no choice but to vote Brexit in the hope of reducing the population and hence demand, as there is no hope of sufficient and suitable supply.

herge 11y ago

Hey dang, if this post doesn't get flagged already, perhaps change the link to the original Telegraph article (http://www.telegraph.co.uk/finance/property/news/12155466/Only-the-rich-and-elderly-will-own-homes-within-a-decade-thinktank-warns.html http://www.telegraph.co.uk/finance/property/news/12155466/On...) instead of the vice news aggregation page.

dang 11y ago
Good catch. (It's better to email hn@ycombinator.com, though, because it's pretty random which of these comments we see.) We changed the URL from http://www.vice.com/en_uk/read/hangover-news-observer-proposal http://www.vice.com/en_uk/read/hangover-news-observer-propos... to the Guardian article it points to, which seems marginally more substantive than the Telegraph one. Submitters: when posting, please follow the HN rules, which ask: Please submit the original source. If a post reports on something found on another site, submit the latter. This does take a little diligence, but only a little, and the benefit to site quality is high. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html

JamesBaxter 11y ago

I feel like I'm burning money renting in London right now. I tried renting somewhere really cheap to save money for a deposit but it made me miserable. Now I spend a lot more and only have to share with one person but I can't save.

deleted 11y ago
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tomp 11y ago
The funnies thing is the CPI (inflation index). The weight it assigns to housing/rent is about the same as the weight for "restaurants and hotels", and lower than "recreation and culture" and "transportation". While this might be true for the houseowners and for non-Londoners, for me rent represents about half (!) of my monthly expenditures. Renting "cheap" doesn't really help - even moving a few zones out of the center, rents would for 10-20% at most.
- stegosaurus 11y ago
  Looking at the CPI list now, it appears that the weighting of housing is broken. It seems that rent is included whilst mortgage interest and imputed interest on equity is not. The split in the UK is very roughly 33% rental, 33% owned outright, 33% owner occupied. What that means is that essentially all the other items have roughly triple the weighting that they should - in a rough sense it ends up showing the housing costs of 1/3 of the population, whilst showing all other consumption of 100% of the population.

colinramsay 11y ago

The UK is bringing in a second home tax: http://uk.reuters.com/article/uk-britain-budget-housing-idUKKBN0TE1OZ20151125 http://uk.reuters.com/article/uk-britain-budget-housing-idUK... http://www.bbc.co.uk/news/uk-scotland-scotland-politics-35113952 http://www.bbc.co.uk/news/uk-scotland-scotland-politics-3511... In the town where I live there are a lot of summer homes that are unoccupied in winter. In London, there are obviously a lot of homes that the rich use when they are visiting. This is an extravagance that is affecting the UK as a whole and a second home tax might help a little. I don't think that the above measures go anywhere near far enough though.

yardie 11y ago
Florida makes its money primarily from income tax. If it's your primary residence you can get some tax relief. If its your vacation home you pay the full weight. It hasn't made an appreciable difference in housing prices. Lots of foreign owners know they'll have to cough up a few thousand dollars every year out of their millions of dollars in assets.
- toomuchtodo 11y ago
  Florida has no income tax. It has a higher sales tax to compensate (and other tourist-related taxes, such as on hotels and rental cars). Our property taxes are very, very low compared to other states though. You're correct in that you receive an exemption if the property is your primary residence, but you overstate the burden of property taxes on >$1MM residences (its really not that high). People purchase a high dollar value home in Florida because there is no limit to the value protected from creditors (except notes tied to the house) in the event you're sued or declare bankruptcy (1/2 acre of land or less within a municipality, 160 acres if you're in an unincorporated area). Source: I'm a Florida resident.
  - lanaius 11y ago
    Cook County sales tax is 10.25%. If you're in downtown Chicago there is a pretty wide area in which restaurants collect an additional 1% tax. And of course there's still income tax. I wish Florida still counted as "higher" sales taxes.

clavalle 11y ago

Is this the New Feudalism? The super wealthy buying property from all over the world literally for rent seeking? Will the world become a Company Town? Is this desirable? Inevitable?

nextos 11y ago
The situation is completely insane. For example, Cambridge used to be a relatively affordable place. Now, rents for 1 bed 50 m^2 flats are in the range of, at least £1200 per month (climbing at a rate of ~£100 / year). It's sad, because it's a good place to do science in, but everything is really expensive. I come from Scandinavia, and things work much better there and are miles ahead in terms of affordability.
- seivan 11y ago
  How is Scandinavia better? Queue for years or get scammed on Blocket? I prefer a free market. At least people can rent out in UK and not get in trouble with the Co-op that only allows one year at a time.
  - nextos 11y ago
    I was referring to the Copenhagen area in particular. It's a nice balance between salaries and house prices. Malmö is even better. Since housing is usually taking the majority of your income, this has a huge impact on the quality of life. As a postdoc, you can easily buy a house in Copenhagen. Or you can rent, at it's barely 1/3 of your salary. In Cambridge, an equivalent flat is more like 1/2-3/4 of your salary. Also the rental market in the UK is really wacky with regards to tenant protection.
    - cplanas 11y ago
      I don't think renting is better in CPH than in Stockholm. Right now I'm paying 10.000DKK (1500USD) for a one bedroom apartment, not in the center (NV). It was the only option that didn't involve any shady stuff like no-contract or not being able to register myself in the apartment. Most of my friends live doing one of those, or renting a room for around 5.000DKK (750USD).

deleted 11y ago

[deleted]

Shivetya 11y ago

Well one issue that has been pointed out by people who work in this area is the program Help to Buy. Many have claimed that this artificially raised prices of homes because of the guarantees and money built in the system. The solution as with Vancouver is to ease the cost of building new homes and possibly using targeted property tax relief of those you are seeking to encourage into home ownership. One other issue is apparently you can actually get a discount on taxation on your other homes if they are furnished because there seems to be some relation to the number of days it is occupied; unless I am just reading that wrong. If so this one area that needs adjusting, reducing tax because you don't actually spend time in the home but it otherwise is unavailable to others should not incur a benefit and if anything encourages buying up second and third homes

jimrandomh 11y ago

This same pattern plays out in most places that're desirable to live. People want to move somewhere, demand for housing goes up, and prices rise because those people compete against each other for the existing housing stock. Ordinarily, this would be addressed by new construction: build enough housing units to meet the demand, and prices will be reasonable. But construction is controlled by local governments through zoning law, and local governments are controlled by incumbent landlords who want the prices to skyrocket to unreasonable levels. So young people end up paying huge amounts of money to established landlords, while landlords distort the narrative to blame the problem on anything and everything except the lack of construction.

zdkl 11y ago
You could do similarly vague postulations about the effect of foreign buy-in of your local real-estate, or the relation between attractiveness/cost per unit of places where replacing existing buildings with denser housing is not desirable for many reasons (historical city centers spring to mind). (EDIT: Speaking as someone who appreciates european-style preserved city centers, even though they do come with their own bag of problems)
- jimrandomh 11y ago
  High prices mean there is a shortage. The solution to shortages is to create more, until there is no longer a shortage. Anything else is lame excuses and class warfare, and it has gotten old.
  - iheartmemcache 11y ago
    It's a chicken-egg problem. Desirable places tend have an ecosystem that offers a high quality of life (as agreed upon by the demand-side of the market at the time). Local coffee-shops, a decent arts and music scene, acceptable public transportation and proximity to work (sociologists have conducted studies which find duration of commute is a direct function of quality of life) are pre-existing features which exist within the those high-demand/low-supply areas. You can gentrify and build out (i.e. Williamsburg, Oakland) gradually building those ecosystems out with it, but in high-demand places like NYC and SF which have a fixed area of land, you can only build up a certain amount in certain regions, and only build out a certain radial length before your commute becomes 90 minutes. Zoning laws controlled (as you mentioned) by incumbent lessors/landlords and NIMBY's who currently own property (and don't want a new co-op or apt complex housing to go up because they'll lose their scenic view) contribute to this problem. "Create more" in those spatially limited/legally restricted regions is difficult. You can region shift and build out there (ie. there are tons of homes available in Kansas one could buy for 3 months of an average SV engineer's salary) but it lacks the ecosystem that, say, SF offers. In places like greater London it's an even bigger problem due to even higher density (you can't really build out into the English Channel).

scotty79 11y ago

Progressive tax on how much estate you own could help by incentivising some owners to sell their houses the can't or don't rent. Of course that would cause estate value to drop which is something apparently nobody wants except for poor people (99%).

pc86 11y ago
I am not in the 1% by either the income or wealth metrics, and I can assure you that a drop in housing prices would do nothing but hurt my family's net worth.
- thaumasiotes 11y ago
  What use are you getting from the nominal value of your house?
  - pc86 11y ago
    Well I did say net worth, not cash flow or credit or anything like that. But a sudden drop in the value of your primary residence can cause issues, including: - Difficulty obtaining a loan if you wish to use the home as collateral (Second mortgage or HELOC) - Inability to sell the house if you owe more than the home is worth If you have no interest or need to move and have no need to use your home's equity to obtain capital, it's just a number in a spreadsheet and is largely unimportant.

ksec 11y ago

I may get downvoted into oblivion, but i will still voice it out. I read the US exported their Inflation of QE to other countries. And then gets the Chinese to spend buying property all around the world. Most government are reluctant to act due to worry of popping another housing market like US 2008. But it is good finally some* are taking notice, given we have 3 HN article the same week on property pricing. But it is likely too late. Those who are now 25 may have some hope to have some things sorted in their prime years. Those who are in their 30s like me will likely have to battle hard just for survival. For those who don't know where this is going, take a look at Vancouver, Sydney, London, or a place call Hong Kong where many people could only afford to live in 10m2 "flat". I maintain that unless there is social housing program in place to guarantee every citizen a place for basic living, housing should NOT be an investment options or should at least be heavily taxed / regulated.

dang 11y ago
> I may get downvoted into oblivion, but i will still voice it out. Please edit this kind of thing out of HN comments. It's against the site guidelines (check the bottom of https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html), and tarnishes your point.
contingencies 11y ago
HK's answer, post-bubble, was apparently nearly free loans. Now that it's losing business to Shanghai and Guangzhou, and being flooded by mainlanders, we'll see how that goes ...

erispoe 11y ago

The problem faced by the UK, and many other countries, is not that people are renters, it's that they have diminishing financial security. Swiss people rent more than any other people in Europe (only 35% homeownership rate) but they are relatively more affluent and being a renter does not impair their ability to save and accumulate assets. Spanish people own their home in a large proportion and I'm sure Swiss people wouldn't trade with them. Let's not conflate the means with the end. The goal is to make people financially secure, homeownership can be a mean to that but it's far from automatic. In fact homeownership can be a consequence of financial security. Your home is an incredibly illiquid asset, and you are likely to need to liquidate it at the worst time.

x5n1 11y ago
I attribute their affluence to their direct democracy. When you delegate decision making to a oligarchy, they find ways to help their friends nickel and dime you and make you into serfs that are ever easier to exploit for their personal benefit.
clock_tower 11y ago
> homeownership can be a consequence of financial security. _The Old Money Book_ recommends this: first get an income stream (outside of your salary), then divert some of it to pay for a house.
tomwalker 11y ago
I agree that homeownership is not the be all and end all for financial security and Switzerland is a great example. I think the biggest concern is that many young people today will not enjoy the same standard of living as their parents in many categories such as job security, retirement prospects, child bearing, etc

colinramsay 11y ago

In certain parts of the UK people are rejecting the norm and opting to live in boats, caravans, yurts and the like. Many of these people live outside the standard economy and work on a semi-barter system, trading skills, and some are artists who are working with modern systems like Etsy and the internet at large to sell their wares. I think that this is going to become increasingly common over time but it does tend to be younger people doing this; it begs the question of what these people are going to do in their old age when their lifestyle choices means that their savings (and pension contributions) are minimal.

wrong_variable 11y ago
Here Here ! As a recent graduate with a cushy programming job in london - I have been thinking strongly living in a van ! Its not because I cannot afford it etc. I hate handing my hard earned money to entitled baby boomers who couldn't get past grade 5.
contingencies 11y ago
In London, cheeky people used to live on canal boats, but even that has become expensive. There are a few great documentaries out there on living small, though mostly US-focused, and mostly "avoid housing regulations by living in a trailer-mounted mini house and calling it a vehicle", there are some interesting exceptions.

Garvey 11y ago

Is there anything wrong with that? I lived in Italy for around 2 years and everyone there seemed perfectly happy with renting. According to this article from The Guardian, it would appear to be similar in France. http://www.theguardian.com/money/2016/jan/14/why-are-brits-so-obsessed-with-buying-their-own-homes http://www.theguardian.com/money/2016/jan/14/why-are-brits-s...

Futurebot 11y ago
Local economic conditions (incomes and rising rents especially) and renter laws aren't equal everywhere. Here in NYC market rate renters can expect 4-10% rent increases a year and can be tossed out for almost any reason whatsoever. In SF they have the Ellis Act. My understanding is that in places like Germany, where renting is common, things are very different (renters are some kind of partial owners of the places they rent, and enjoy much greater protections than in other places.) In the most difficult US markets, ownership is a lifeboat on a wild economic sea if you can come up with a downpayment or, even better, can buy outright, as rents tend to grow much more slowly than property taxes. This is doubly true if you own an apartment rather than a house and can just pay a maintenance fee rather than dealing with paying for it yourself.
- iheartmemcache 11y ago
  The German renting market is really interesting. Some reasons contributing to such a low owner rate include, 1: favorable laws in rent control - preventing more than 15% over 3 years (~4% per annum), negating the need to buy to hedge against the risk of huge rent increases[1], 2: the tax policy is structured such that home-owners do not get to deduct things like mortgage interest payments, unlike in the US and Spain, 3: the German banks are inherently risk-adverse and as such have historically been pretty stringent when it comes to lending, 4: in tandem with (3) , there are no government subsidies or programs like the FHA which offers banks the ability to offer mortgages to people with only 3% down. [1] http://fic.wharton.upenn.edu/fic/papers/03/0301.pdf http://fic.wharton.upenn.edu/fic/papers/03/0301.pdf, Banks' Advantage in Hedging Liquidity Risk: Theory and Evidence from the Commercial Paper Market
- 11y ago

matthewcford 11y ago

Well forget ever buying in London, my rent alone in central London is £2656 ($3800) a month. This flat would be more than £565,000 to buy. How anyone saves for a deposit, while paying rent - without help from their parents is beyond me.

stuxnet79 11y ago
WTF!!? & here I thought Toronto was bad. I'm assuming rents don't get any higher than this right? You must earn a lot although I'm certain the rent erodes a significant amount of your take home, after tax pay.
- robk 11y ago
  That's like 50th percentile for central London for a 2 bed flat.
  - twic 11y ago
    But central, rather than inner. Of course it's eyewateringly expensive to live in central London. The way London works is that people live in the bits outside the centre, and commute in for work and leisure. People who live in the centre are a bit of an anomaly.
- martinald 11y ago
  Not expensive at all. Decent standard one beds in an ok area in zone 3 can cost £1500/month easily (about 10km from the centre of London).
keville 11y ago
> How anyone saves for a deposit, while paying rent [...] is beyond me. I couldn't agree with this sentiment of confusion more -- especially living in San Francisco, even with a reasonably healthy wage.
contingencies 11y ago
My answer to London was to find a cheap, multi-bedroom flat and sublet the rest. After that I wound up paying about £300/week, or under half what you pay. 2009 Whitechapel, near Brick Lane.

spangry 11y ago

Same problem in Australia. Just to define some terms for non-Australian folk: - Negative gearing: A deduction received on net rental income losses (e.g. I'm a landlord who pays $100 in loan interest, receives $60 in rent, so I claim a tax deduction of $40) - Capital gains: I buy a house worth $100,000. A few years later I sell it for $260,000. I've made a capital gain of $160,000. The under 30s age group receive: - 1% of total negative gearing tax benefits, whereas the 50+ age group receive 55% (http://www.macrobusiness.com.au/wp-content/uploads/2016/02/ScreenHunter_11535-Feb.-16-08.09.jpg http://www.macrobusiness.com.au/wp-content/uploads/2016/02/S...) - 2% of capital gains tax benefits, whereas the 50+ age group receives 76% (http://www.macrobusiness.com.au/wp-content/uploads/2016/02/ScreenHunter_11536-Feb.-16-08.10.jpg http://www.macrobusiness.com.au/wp-content/uploads/2016/02/S...) It's inter-generational theft perpetrated by the baby-boomers, aided and abetted by tax policy. These tax breaks also cause of financial system instability and capital mis-allocation. The tax breaks are regressive: the top 30% highest income households receive 62.2% of total negative gearing tax breaks (http://www.macrobusiness.com.au/wp-content/uploads/2015/04/ScreenHunter_7244-Apr.-28-13.45.jpg http://www.macrobusiness.com.au/wp-content/uploads/2015/04/S...). Personally, I think the main issue is that the distortionary effect of untaxed land rents are greatly amplified by capital gains tax exemptions. That, and housing market supply inelasticities due to restrictive zoning laws, property transaction taxes (i.e. stamp duty), drip fed land releases by local governments etc. Eat the young!

PebblesHD 11y ago
The whole situation in Australia is infuriating at the moment. I feel like I'm in a reasonable position for a young professional but I have zero chance of getting any sort of housing security with the way things are now. Between bills and rent at the moment it would take me years to save the amount needed for a deposit, and even then I'd only be able to borrow enough money for a house more than an hour and a half's commute from work each way, which totally defeats the point. I've been willing to forgo a short travel time for a reasonable place to live for years, and it's really starting to get to me. Sadly, remote work is also out of the picture thanks to the sad state of my 'ADSL2' that tops out at 2mbit/s... It's just not a great place to be right now

thesimon 11y ago

Grace Dent writes for the Independent how "for the average person, marrying into property will be your best shot at 'owning it'" http://www.independent.co.uk/voices/the-housing-crisis-is-creating-sharp-elbowed-husband-hunters-a6875576.html http://www.independent.co.uk/voices/the-housing-crisis-is-cr... Crazy. But to be honest, why is everyone focused on buying a house? Does everyone want to own a house, 1.7 kids and a car or where does the need to buy instead of renting come from? Maybe I'm missing something, but the flexibility of renting seems a lot bigger advantage than the small advantages of owning a house.

cmdrfred 11y ago
Depends I guess, for me I want to lower my cost of living in old age and not paying rent is a big factor in that.
- NikolaeVarius 11y ago
  You would probably come out far ahead taking the money you would have paid on the down payment and house maintainance and invested in the stock market. Tends to be much MUCH better return wise versus homes.
  - laurencerowe 11y ago
    In the US, mortgage interest is tax deductible whereas rent is not. The more you earn (and thus the higher your tax bracket) the more this subsidy is worth. The other big factor is inflation. Rent will increase every year while your mortgage payments will stay at the same nominal value. Admittedly inflation is much less of a thing now, but in the past it made owning a home hugely more worthwhile. Great calculator to explore the various paramaters here: http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html http://www.nytimes.com/interactive/2014/upshot/buy-rent-calc...
  - cmdrfred 11y ago
    Better returns directly on the money (given historical averages hold) yes. You also have to consider I'm locking in my monthly housing cost in 2016 prices (until I pay off the mortgage that is, then I merely have to pay property taxes) also I can make improvements to my standard of living that renters can't. If I want a hot tub, I simply install one rather than having to find an apartment with one and paying a massive monthly premium for it. Rent for a decent one bedroom in my area is $1200 a month, my mortgage is $1120 (taxes and insurance included) and that gives me 3 bedrooms and a yard. For me this was the better choice.

mschuster91 11y ago

Hmmm... biggest shortage of housing is in the London area, I guess? This is due to people parking their funds in real estate because interest rates anywhere in the stock market are basically zero when compared to real estate, and because transferring ownership of an estate holding company is a pretty nice way to launder/transfer money. I'd propose a law that makes it illegal for an estate owner in housing-crisis areas to leave a home un-occupied for over 4 months a year; if this is not the case the state is allowed to choose an arbitrary person and let him rent the apartment at a rate similar to the non-luxury-housing market. In Germany, in some areas this law is already in effect (e.g. http://www.hamburg.de/contentblob/3999156/data/hamburgisches-wohnraumfoerderungsgesetz.pdf http://www.hamburg.de/contentblob/3999156/data/hamburgisches...). The legal foundation for these laws is in the Grundgesetz: "Eigentum verpflichtet. Sein Gebrauch soll zugleich dem Wohle der Allgemeinheit dienen.", which basically means that if you have the privilege of owning something, you have to contribute to common wealth with it.

autotune 11y ago
How do you determine that someone has occupied the home before 4 months? How long should the length of the stay be? If some ridiculously rich person has a bunch of houses, this would mean they just need to visit each house once every 4 months, or send someone to do it, which for the people lucky enough to own a home in London I can't imagine being difficult.
- mschuster91 11y ago
  > How do you determine that someone has occupied the home before 4 months? Make the owner register his primary residence. I forgot not every country has something like we Germans have with the Meldewesen. Seriously, using utility bills as proofs of residence... what a load of ...
paulddraper 11y ago
So...you can't have a summer home? Ever? And if no one uses a timeshare over the winter they lose it? Taken literally, this seems horrible. I'm assuming that the tenant gets rights and you can't just walk in and kick them out.

gozur88 11y ago

When I graduated from college you'd see exactly this sort of article in the paper every so often. And indeed, at the time the 20% downpayment for a house was going up faster than I could save money. And then the housing market collapsed and I bought a house. Over long periods of time housing only goes up about as fast as inflation. Younger people in the UK are not facing "becoming permanent renters". They're just facing a bubble, for the time being, that will produce lots of bargain prices when it pops.

eterm 11y ago
That's not true, certainly not in the south east. The bubble never burst here, house prices have been growing faster than inflation for decades. Politically it is now impossible to let it burst, so all sorts of schemes are made up to keep it going. Edit to add: a typical 2 bedroom terrace or end of terrace now costs between £350-500k ($500-700k) here. These are not large homes, don't have luxurious gardens, don't have a garage at all. This isn't even London, this is just outside London in the south east. And wages haven't kept up. Imagine San Francisco house prices without San Francisco wages, that's why people are talking about a generation of renters.
- mjevans 11y ago
  This concisely points out exactly why we never recovered from the great recession of our time. It is politically beneficial to obey the rich paying for their campaigns, and placate the voters, then to deliver the harsh correction for bad behavior that a controlled lancing of the bubble would involve.
- deleted 11y ago
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  - gte525u 11y ago
    The GP is talking about the UK.
    - 11y ago

bane 11y ago

Here's an oldie but a goodie that I refer people to on this topic http://assayviaessay.blogspot.com/2014/04/rent-or-buy.html http://assayviaessay.blogspot.com/2014/04/rent-or-buy.html

guy_c 11y ago

Firstly there seems an inherent bias that young people want to be homeowners and not being a homeowner is bad for people. My first reaction to "Under-35s in the UK face becoming permanent renters, warns thinktank" is, "So what?". We are not talking about people being homeless. Also I think lots of these reports never make any mention of demographic changes over time. The 35 year old of 1998 is likely to be a very different person to the 35 years of 2026. In the 18 years since 1998 we have seen university attendance increase from 25% to 33%. We have seen the cost of university education increase, so most graduates now carry more debt. I suspect we've seen an increase in the average age of marriage. Probably also a reduction in marriage and number of people that are having children by 35.

pcardh0 11y ago

Thank god I am 48.

pcardh0 11y ago

Thank god I am 48.

boredatnight12 11y ago

Phew. Wait! I'm still renting a flat.

kamaal 11y ago

Don't want to rub salt of people's wounds here, but remember when you guys screamed on the top of your voices that real estate was a bad instrument. This is basically what happens when you follow that line of thinking, when your demands start popping up later in life you realize you could have easily made those investments a few years back, but you didn't. And may be even watch people who made far lesser than you in salary having better house than you. May be if these under-35's had saved some money instead of blowing it all on "enjoying their lives", "travelling the world" and on those new iPhone models every year they would have a decent sum for a downpayment somewhere in the out skirts. Also note that most landlords themselves probably went through hell to build themselves this portfolio for their rainy days. If you think you can't buy yourself a home, you need to drastically rethink your priorities. Because like it or not, anytime is the best time for these things. Its about timing, location and money. Earlier you buy, the better place and lesser price you get to buy. For the perspective of the next decade now is the right time. You an tax the rich as much as you won't, no matter anywhere in the world. Most of these people will never come to own a home. The true reason why these people can't afford a home is not because its expensive, but because they refuse to commit themselves to any kind of a long struggle, that doesn't interfere with the privileges they think they are entitled too.