Thursday, Feb 18, 2010
What a difference a generation makes.
Telegraph: Today's young adults can't afford to let go
Bryony Gordon is a 'Yuckie' - Young Unwitting Costly Kid. She asks why so many adults are still being funded by mum and dad.
Posted by flintster1994 @ 01:28 PM (4414 views) Add Comment
21 Comments
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1. tenant super said...
The baby boomers had a favourable economic environment in some (though not all) respects but I do feel they are being somewhat scapegoated. Many of them like my parents don't know let alone care what their property is worth, worked hard for a much reduced private pension and far from being nimbys would rather see lots of houses built so their adult children would finally leave home.
If I was born thirty years earlier I would have taken advantage of all the opportunities they did, probably including house price inflation. Knowing objectively what is right and wrong does not stop my self-seeking behaviour that the vast majority of human beings suffer from. However, the boomers' expectations that young people should fund their care home costs and the nimbyism rife among *some* of them needs addressing. I think what is emerging is the resentment that my generation including myself feel that we cannot have the same life as our parents. I cannot afford the house I grew up in funded by a moderate single salary. My cousin who grew up in a three beroom council house has no hope of getting a council tenancy herself. The world we thought we were growing up into has disappeared.
Before Mr. G gets upset... I agree that the boomer-bashing is a distraction from the real villains, the banks, property developers and government who conspire in the HOIst ideology rather than seeking to re-educate and implement mechanisms such as MWs beloved Land Value Tax that would lead to a better country for these and future generations.
LVT isn't going to happen. Re-education isn't going to happen. I feel very lucky that we both bought a home before the boom, but we are looking to emigrate so we can buy something bigger and nicer. Trying to get through to my colleagues and friends and partner about the inherent destructive nature of a HOIst society has been desperately futile, so I would rather leave this country than indulge the frustration and anger that would arise by staying.
2. powerofnow said...
@tenant super: Trying to get through to my colleagues and friends and partner about the inherent destructive nature of a HOIst society has been desperately futile....
I'm interested in this bit, what is the block in people changing their minds on this issue? Even the Shelter campaign gets stuck on the issue of house price inflation and doesn't ask the question what mechanism perpetuates it.
3. tenant super said...
Power of now
1) With my friends...Seeing their parents make a killing on property makes the priced out generation believe they can do the same, that's why they stretch as hard as possible to get a 25% share of a toy-flat in the mistaken belief their money will multiply endlessly. The reason there is a block is the same reason why internet pyramid schemes resurge now and again and why Ponzi schemes still sucker in victims. Take my fellow student NG (middle class, bright Kentish Grammar schoolboy now aged 27). I explained why falling prices were good for him and everyone else in the group. "But they're a great way of making a lot of money" he said as I banged my head off my desk.
2) Mr TS. Witnessed his sister make a killing on property. Given that when she cashed in on the rising values of her three London homes instead of taking the 0.75 million profit and living a mortgage free life, in her greed she re-invested the lot back into property months before the crash and now stands to loose everything, you would think he'd see sense. But he figures the only mistake she made was re-investing at the wrong time and rightly, if she had listened to the likes of us, she'd have had a very comfortable life indeed.
Mr TS also owns his flat (good location/ area in London) with 60% equity and should be mortgage free within a decade and sees this flat as a source of regular income when he retires. He has no faith in his private pension.
In fairness to Mr TS, he is slowly coming to realise that as his own flat has doubled in its valuation in the ten years since he bought it, that's only good for him if he moves somewhere cheaper. He is also wising up to the idea that the only winners are the banks and we are better off leaving England.
3) Colleagues. Now I spent some time explaining to a junior manager I work with why he was saved from himself. He saved a deposit and him and his misses were going to buy a new build toy-flat. Only trouble is, this meant lending them 5 x joint income and when the credit crunched they would only lend them 3 x joint income (still far too high). I explained why he would now be able to save a bigger deposit and at the time prices were falling sharply. He couldn't understand that buying into a falling market was the equivalent of setting fire to his savings as the equity would soon disappear. He just saw the big nasty banks not wanting to help him.
To summarise, these are some of the mental blocks:
- Desire for profit/ greed engendered by witnessing older people profit from property
- Ignorance of how HPI affects upsizers
- Ignorance about affordability, optimism about future earnings
- Media conditioning
- Notion that property investment is the only/ best way of funding retirement
- Social status associated with home ownership vs renting in the UK
4. tenant super said...
Just to add that I toally agree about Shelter's lack of rigorous analysis. With one breath they bemoan HPI and with the next, they ask for bailouts of homeowners/ moratoriums on repossessions. Talk about wanting cake and eating it!
5. cat and canary said...
"Abbey Mortgages research found that in 2009, almost 500,000 adults aged between 35 and 44 returned home to live with their parents"
... shame on you Gordon, with you b****** financial engineering. Sickening
6. mark wadsworth said...
Tenant, those are fine examples of how the cult of Home-Owner-Ism enraptures even those who are plainly losing out.
And they remind me how much work I have to do to overcome Home-Owner-Ism. Like you, I have found it difficult even to explain to the losers how, why, and to whom they are losing out, let alone persuading the winners not to be so selfish.
7. Notyethomeless said...
I wish I could shift some of the mental blocks in my other half. She cant believe that buying a house is not a great idea right now, and I could come in for some serious grief if I stick to my guns and we continue to rent. We have the cash to buy, I just don't want us to. Unfortunately, she has at least half of the mental blocks that Tenants lists @3 above, and I've been given a deadline of August. My only hope is that the crash starts again very soon, and all h3ll breaks loose in the housing market.
Is it relevant that she grew up in Spain, that great other HOI state?
8. tenant super said...
"And they remind me how much work I have to do to overcome Home-Owner-Ism."
Mark, I admire your optimism. I've given up and written off a vast swathe of the population as unteachable not because they are iredeemably dumb but because the conditioning is too ingrained
These are the subliminal and liminal messages that are indelibly printed on the brains of my associates
"Renting is dead money"
"'In America it's clear they were building too many houses. In Spain, it's clear they were building too many. In Britain there's a pent up demand for housing. Supply has not kept up with demand for housing." Gordon Brown reassuring the HOIsts that fat prices are here to stay and this is good!
"Much to my bank manager’s horror I do not have a pension. I just have my property. Property is the thing that you have the greatest degree of control over. ..By the time my parents were my age they would certainly have had much less cash but they had better property investments than I did. Their investments were so wise and so good over the years ..." Kirsty Allsop
"For many young families who aspire to own a home, the difficulties in the housing market have made the step on to the property ladder that bit harder. This deal will give them more support and put their dream of becoming home owners within reach." Margaret Becket espousing the homebuy direct scheme, a prop for high prices ergo harming the people they say it helps.
"This chap was in a terrible state – bankrupt, lost his home, but do you know what? He still aspired to owning a home again."
Grant Shapps recalling this incident from a surgery session.
This are the messages bombarding people from all directions, constantly. People say our culture is highly sexualised with TV saturated with a glamorisation of sex and drinking. But this is nothing compared to the HOIst culture messages in the media. And as well as the media, you hear this from real people all around you, all the time.
9. smugdog said...
Mrs T Super, you talk with a great deal of passion, and restrained anger.
What ages are you and Mr TS?
Where is it that you are considering emigrating to?
Many younger friends now say "why bother - what's the point"
Should the "Boomers" contribute, I think not. However, I do think that massive changes are in the wind,
whether Goverments like them or not.
Best of luck to you Mrs TS.
10. tenyearstogetmymoneyback said...
Tenant super commented on Nimbys.
There was a feature on the local news about people trying to stop a 700 house development being built.
It was noticable that they were all in their 50s with about three dogs each. Their main argument seemed to be
that building more houses "would destroy village life"
11. alan_540 said...
Higher unemployment, weak wage growth and higher interest rates will put downward pressure on prices for the forseeable future - the real falls are yet to come. Last years upward blip can be ignored, use the next few years to save for a deposit (not to mention as an income from higher interest rates) and jump on the bandwagon when you can buy a reasonable 3-bed semi for 2.5x a single income. Rent in the meantime and don't allow yourself to be stigmatised or embarrassed about it. The flexibility of renting may be good in terms of mobility for finding better employment as the recession pans out.
12. drewster said...
This article is quick to blame baby boomers. Actually it's far more recent than that - anybody buying a house in 1995-2001 would be sitting pretty now. I'm unfortunate in having just missed out on that cohort.
13. happy mondays said...
TS you took the words out of my mouth, & the wake up call will be here soon..As smugdog say's the winds of change are coming..
Here's a bit of nostalgic music http://www.youtube.com/watch?v=3dWkJ2XYVlQ
14. tenant super said...
Smugdog, I am 33 and Mr TS is 40. We both earn about the London average salary. We were fortunate enough to buy decent flats at reasonable prices in 1999 and 2000 and as we did so independently could now pool our resources and upsize. But apart from the fact that Mr TS wants to keep his flat as an income source when he retires, and I am keen we keep separate households, I cannot bring myself to pay the current price of a house in a decent area even though we would not have to extend ourselves much further. I look at the property and the price and my head just screams "crazy".
Mr TS is Irish and so we have friends and family there. If (and it is a big 'if') one of us can find a job there (I work in academia and he in facilities management) we'll keep his London home and use the proceeds from my flat, the equity from which would enable us to buy a three bedroom house in somewhere like Laois where his parents are, with either a small mortgage or none (even with sterling depressed). So in fact if we manage to find work in an economically devastated country we would be winners of the UK HOist system. And Ireland where corrupt developers and shady bankers are bailed out and given sweet deals through NAMA, will I am sure, provide plenty of other avenues for anger!
The thing is, I have to get on with my life the best I can. I remember that I am very fortunate in my circumstances but what about the children I might have and my priced-out brothers (aged 27, 24 and 21) who adopted that "why bother - what's the point" attitude a long while back. It is frustrating that successive UK governments have pandered to HOist ideology, restricted house building, perpetuating this ethos of endless unearned housing wealth and condemning a generation to unnecessarily large housing costs.
15. mr g said...
@13 "We both earn about the London average salary. We were fortunate enough to buy decent flats at reasonable prices in 1999 and 2000 and as we did so independently could now pool our resources and upsize. But apart from the fact that Mr TS wants to keep his flat as an income source when he retires, and I am keen we keep separate households"
You sound to be a very fortunate couple and good luck to you.
However, because of your ages you don't qualify as HOists and therefore don't get criticised by the HPC elite, whereas someone like myself of the baby boomer generation with your property portfolio would be accused of wreaking havoc on your generation.
16. mark wadsworth said...
@ TS, comment 7, yes more good examples of how ingrained Home-Owner-Ism is, well put.
But I'm really depressed again now :(
17. tenant super said...
Mr G. I don't see myself as a person with a "property portfolio". I have a home which I live in. Mr TS has a home which he lives in (although we spend five days a week together at one of our homes). Although technically we could, if viewed as a single entity (which is silly as we are not married) be considered "property portfolio" people this was serendipitous - in 1999/ 2000 it was cheaper to buy than rent so it made sense.
I think BTL landlords should be discouraged but I have no objections to two people in a relationship whether married or not having a home each as this is a natural consequence of social change. We have separate careers, bank accounts and why not homes? I don't accept the view that I have to cohabit just to free up a home! We did live together for four of the twelve years we have been together and both prefer it this way (possibly because London flats are always going to feel a bit claustrophobic).
I agree that a lot of the boomer bashing is unjustified. Who amongst us youngsters can put our hands on heart and say we wouldn't have done the same? All the boomers did was make the most of their circumstances. Yet I don't feel any sense of filial duty to my parents generation and certainly don't think I should dig deep to fund free oyster cards or care costs for property rich pensioners.
The point is, the system is broken and the boomers along with a good proportion of generation X took advantage of that system. We need to build better quality houses in greater numbers, discourage BTL and property speculation and dampen property bubbles when they emerge (rather than encouraging them). The thing is most people, deep down, know this but noone has the political will.
18. mr g said...
TS@16 "Who amongst us youngsters can put our hands on heart and say we wouldn't have done the same?"
That is music to my ears, at last some honesty!
Most of the boomer bashers would do the same given the opportunity but are not honest or mature enough to say so, your comment makes a refreshing change which I have the utmost respect for.
The acquisition of assets through hard work and integrity is nothing to be ashamed of. As far as I'm concerned, in this life, you do whatever is best for yourself and your family without doing the dirty or riding roughshod over other people.
19. tenant super said...
The housing situation needs to be viewed through a Rawlsian veil of ignorance - a method of determining the morality of a certain issue based upon the following principle: imagine that societal roles were completely re-fashioned and redistributed, and that from behind your veil of ignorance you do not know what role you will be have For example, whites in the US who approved of slavery, would not have done so had there been a re-fashioning of society so that they would not know if they would be the ones enslaved. ...In this thought experiment "no one knows his place in society, his class position or social status; nor does he know his fortune in the distribution of natural assets and abilities, his intelligence and strength, and the like" . We can add that you also, for the purposes of our thought experiment, you do not know what era you will be born into.
Assume you are entering a brand new society and do not know whether you will be a young adult in a boom or a bust, you don't know whether you will inherit, whether you will be a high or low earner, whether you are bright or not ... in short whether you'd be a winner or loser in the property game if it were structured as it is in the UK.
Surely, you would structure that society so a decent family home is affordable to all and prices stable and low rather than rapidly rising. That is because as Rawls realised, ignorance of these details about oneself will lead to principles that are fair and if an individual does not know how he will end up in his own conceived society, he is likely not going to privilege any one class of people. In particular, Rawls claims that those in the Original Position would all adopt a strategy which would maximise the position of the least well-off. You would not conceive a system where prices become so high that young people can't access housing without being over in-debted in case that happens to be you.
Even though I might be a winner in reality and take advantage of my good fortune in the system, I can see that from the Original Position the system is wrong.
20. Corriander said...
@18 trouble is from the original position I might fancy gambling in the hope that I'd be a boomer with a huge portfolio.
21. powerofnow said...
@TS18 this surely is the only conscious human approach to take, I like it.
Boomer Bashing or blaming any individual or group of individuals is wide of the mark.... our task it seems is all about nurturing an understanding the underlying social, financial and legal structures which ensures the perpetuation of boom and bust speculation in land values.
(if MW is depressed we are all in trouble)