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Dorkins

Young People Lose Out As Uk’S Housing Wealth Gap Widens

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There's a very good article and 4 minute video today on the FT about home ownership and housing equity among UK under-35s. Incredibly, home ownership among UK under-35s fell from 2.2m properties to 1.4m between 2001 and 2011.

Link for FT subscribers:

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Link for non-subscribers:

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Edited by Dorkins

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If the number of properties owned by under-35s has continued to fall by around 80,000 per year since 2011, we are now probably somewhere around 1.1-1.2m, about half as many as there were in 2001. There are around 800k people in each 1 year cohort, so the 18-34 age group contains about 13.6m people who own just over 1 million residential properties between them. On this trend, home ownership among under-35s will cease to exist by 2030.

I find these numbers pretty astonishing.

Edited by Dorkins

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If the number of properties owned by under-35s has continued to fall by around 80,000 per year since 2011, we are now probably somewhere around 1.1-1.2m, about half as many as there were in 2001. There are around 800k people in each 1 year cohort, so the 18-34 age group contains about 13.6m people who own just over 1 million residential properties between them. On this trend, home ownership among under-35s will cease to exist by 2030.

I find these numbers pretty astonishing.

There's 12 million votes there. How many would it take to win an election? Perhaps I could start the 'home party'.

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I think this misses an important point:

The risk has been transferred to the elderly/landlords.

This is the same with any imbalance. Global imbalances/EZ imbalances, over-priced equities, and in this instance UK housing imbalance.

Young people have, by accident as much as design, chosen not to take on this risk, instead passing it onto property owners. Taking this point in time as the benchmark is dangerously misleading.

A quick example if this would be that property owners saw their assets plummet 30% in real terms in 2008/9. Young non-owners did not. They thus must have seen a 30% relative increase in their wealth over this period.

Similarly, at some point in the future, home-owners in London/SE in particular will see this risk crystallised and the wealth they think they have accumulated will flow back the other way. It may take a while, but it is (imo) inevitable. The risk is entirely with home-owners in London/SE. The younger population would do well to let it remain where it is and enjoy the almost non-existent risk of consuming property on a pay as you go basis - whilst lobbying for improved rental tenure.

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On this trend, home ownership among under-35s will cease to exist by 2030.

I find these numbers pretty astonishing.

Not really. 100 years ago 4.5% of the population owned everything. The UK is simply reverting to the historical norm having seen a few decades of deviation due to social fallout from WWII and modern industrialisation.

The French had a revolution, the UK had Pitt the younger: "From 1794, radical political leaders could be arrested without trial. In 1795, during a period of high food prices and severe public agitation, stones were thrown at the King's carriage as he went to Westminster to open a new session of parliament. In the fevered atmosphere of the time, such actions could easily be interpreted as portending revolution. Within weeks, a parliament dominated by fearful landowners had passed legislation that redefined the law of treason, and that made it almost impossible to hold public meetings in support of reform".

Given that France's property market is now pretty much slipping back to post Lehman's levels (even in Paris), I wonder whether things would have been different in the UK if there had been a few royal heads on spikes rather than on every Daily Mail front page (above or below the obligatory property picture). Might at least have had properly regulated rent inflation anyway...

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The risk is entirely with home-owners in London/SE. The younger population would do well to let it remain where it is and enjoy the almost non-existent risk of consuming property on a pay as you go basis - whilst lobbying for improved rental tenure.

Letting somebody else take on the risk of an HPC is the best option for the young at present, but best option does not equal good option.

The cost of letting somebody else take on the risk of an HPC is not zero - uneven levels of maintenance by landlords, letting agent fees and other shenanigans, less domestic stability, significantly curtailed freedom to customise your living space, own pets and decide who lives with you, worse treatment of private renters with savings than homeowners with equity by the tax and benefit system etc.

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Good article/video.

I'd love to see how these two figures would differ.

1) 2014 UK housing equity accrued with 15 years of HPI.

2) 2014 UK housing equity accrued without 15 years of HPI (ie, equity created by debt repayment, ie REALITY)

Trillions, I suspect.

The difference represents the greed of the Finance Sector, the incompetence/corruption of Governments and the foolishness of a critical mass of the population.

Madness all round.

Edited by Reck B

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Not really. 100 years ago 4.5% of the population owned everything. The UK is simply reverting to the historical norm

The 19th century saw the fastest social and economic change to ever happen to this country. The population tripled and urbanised and the economy industrialised in the space of one human lifetime. It hardly represents any kind of stable historical norm.

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I'd love to see how these two figures would differ.

1) 2014 UK housing equity accrued with 15 years of HPI.

2) 2014 UK housing equity accrued without 15 years of HPI (ie, equity created by debt repayment, ie REALITY)

Take away 15 years of HPI and I think the 35-49 age group he used on that equity graph would be completely and utterly borked. This is the age group that leveraged up to the eyeballs to buy the big family home.

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The 19th century saw the fastest social and economic change to ever happen to this country. The population tripled and urbanised and the economy industrialised in the space of one human lifetime. It hardly represents any kind of stable historical norm.

I think you'll find the percentage who owned everything drops the further you go back. As you say, 4.5% of the population having 100% land ownership was actually pretty equitable by historical standards so is probably a bad example. The historical norm would be significantly sub 1%. France only reversed this trend through punitive inheritance laws that automatically split estates between offspring. Annoying for the little guy but more destructive for the landowner-dynasties.

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I think you'll find the percentage who owned everything drops the further you go back.

In that case the historical trend is for assets to be held by a larger percentage of the population as time goes on, no?

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That's a relief. Thank God the Normans took on all our risks in 1066.

What's your view on prime areas of Yorkshire? The stuff that hasn't fallen much if at all since 2007.

IF London/SE corrects and sees price falls, do you expect posh Yorkshire to follow or is it a 'different' market?

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It may take a while, but it is (imo) inevitable. The risk is entirely with home-owners in London/SE. The younger population would do well to let it remain where it is and enjoy the almost non-existent risk of consuming property on a pay as you go basis - whilst lobbying for improved rental tenure.

Sounds about right to me. Relax and rent.

Yet hope something comes along to bring about a rapid adjustment, rather than decades of this. So bad that older VIs and the newspapers stilling getting excited about rising house prices. That's the worse part of it, as though it's a good thing. Only good for those at higher end of the market.

Shakespeare's Dad went on a property buying fest, until the Elizabethan depression that began in the 1570s, which saw him forced to sell farms and properties, often at low prices, and saw him hit by lawsuits and hounded by bailiffs. It always back comes around, to bring supply back into the market, and readjustment in prices. They've just stretched out the eventual correction worse by QE and now HTB2 allowing those with little deposit to outbid smarter people.

Incredibly, home ownership among UK under-35s fell from 2.2m properties to 1.4m between 2001 and 2011.

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I think this misses an important point:

The risk has been transferred to the elderly/landlords.

This is the same with any imbalance. Global imbalances/EZ imbalances, over-priced equities, and in this instance UK housing imbalance.

Young people have, by accident as much as design, chosen not to take on this risk, instead passing it onto property owners. Taking this point in time as the benchmark is dangerously misleading.

A quick example if this would be that property owners saw their assets plummet 30% in real terms in 2008/9. Young non-owners did not. They thus must have seen a 30% relative increase in their wealth over this period.

Similarly, at some point in the future, home-owners in London/SE in particular will see this risk crystallised and the wealth they think they have accumulated will flow back the other way. It may take a while, but it is (imo) inevitable. The risk is entirely with home-owners in London/SE. The younger population would do well to let it remain where it is and enjoy the almost non-existent risk of consuming property on a pay as you go basis - whilst lobbying for improved rental tenure.

Exactly, just sit back at mum and dads and watch it all go pop. Should be fun, except the old inheritance is going to take a hit also. Ah well, could be worse, they could be an overleveraged "homeowner" who is flooded and desperate for a buyer.

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Not really. 100 years ago 4.5% of the population owned everything. The UK is simply reverting to the historical norm having seen a few decades of deviation due to social fallout from WWII and modern industrialisation.

The French had a revolution, the UK had Pitt the younger: "From 1794, radical political leaders could be arrested without trial. In 1795, during a period of high food prices and severe public agitation, stones were thrown at the King's carriage as he went to Westminster to open a new session of parliament. In the fevered atmosphere of the time, such actions could easily be interpreted as portending revolution. Within weeks, a parliament dominated by fearful landowners had passed legislation that redefined the law of treason, and that made it almost impossible to hold public meetings in support of reform".

Given that France's property market is now pretty much slipping back to post Lehman's levels (even in Paris), I wonder whether things would have been different in the UK if there had been a few royal heads on spikes rather than on every Daily Mail front page (above or below the obligatory property picture). Might at least have had properly regulated rent inflation anyway...

People think it is all about economics. It is actually all about power.

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I think this misses an important point:

The risk has been transferred to the elderly/landlords.

For most homeowners the risk isn't real, because the wealth isn't real.

It's landlords and speculators who lose out when housing costs fall, particularly if they are leveraged.

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For most homeowners the risk isn't real, because the wealth isn't real.

It's landlords and speculators who lose out when housing costs fall, particularly if they are leveraged.

It is if they MEW`ed? The real risk is to the banks though, hence all the desperate attempts to pump the bursting bubble?

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It is if they MEW`ed? The real risk is to the banks though, hence all the desperate attempts to pump the bursting bubble?

As well as owning a house, homeowners also consuming housing and borrow money.

The first two net out, and the third is just an independent consideration.

So no, MEW is irrelevant.

Some home owners own more than they consume, they will lose-out to some degree from price falls, and therefore have some risk.

If you look at the total consumption of families, the situation is even less risky. Price falls might put an end to equity baded BOMAD, but it also removes the need for it.

Net across the whole country, and it's more or less zero sum, although I believe the nation as a whole is net short British housing, because of the degree of foreign ownership.

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