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Only One Lucky Generation Ever Struck Housing Gold

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If there’s one thing that drives Generation Rent up the wall it’s hearing stories about their elders snapping up detached Georgian houses in Knightsbridge for a song back in the day. Such stories give the impression that buying a wonderful home used to be a doddle – that they were practically given away for free – only for things to change dramatically and create a situation that is now terribly unfair. For these malcontents I have some words of comfort: apart from one brief period,buying a home has always been hard.

The young and the old know all about renting - it's those born in the Fifties who managed to cash in

The golden generation of home ownership - an exception not the rule.

telegraph: article here...

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Absolute pish.

I paid cash. Or had a tiny mortgage, for the 4 or 5 houses I've owned.

if I'd to try buy the equivalent now on my current income after saving the same period of time, couldn't do it. I'd be in debt forever.

Edited by TheCountOfNowhere

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There is some truth to it...In todays money, a house around 1910 cost £10,000...but the average labourer was on £2,000 a year.

However, apart from peaks in the 70s and 80s, that wasnt the case between 1950 ish and the late 90s.

What pisses me off is not so much the cost...if it was warranted, ie there was a shortage of bricks or something, but because its all so unnecessary. Take credit booms out of the equation, or remove govt intervention via planning permissions and the problems go away.

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There is some truth to it...In todays money, a house around 1910 cost £10,000...but the average labourer was on £2,000 a year.

However, apart from peaks in the 70s and 80s, that wasnt the case between 1950 ish and the late 90s.

What pisses me off is not so much the cost...if it was warranted, ie there was a shortage of bricks or something, but because its all so unnecessary. Take credit booms out of the equation, or remove govt intervention via planning permissions and the problems go away.

QED

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I think that at one point in the 1970s wage growth was over 30% with interest rates being in the mid 20%s. Yes, it may have been a stretch for them to buy on day 1, but 2 or 3 years down the line their earnings had grown so much relative to their debt that they were ready to upsize again. A relative of mine told me that they doubled their mortgage every time they moved.

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Why can't this generation be 'lucky'? Or the next?

Maybe the next, but it's getting a bit late for this generation. To really make property hay you need your luck early on in life, pretty soon this generation will have passed the critical stage.

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The lucky generation got two bites of the cherry on cheap housing and mortgage availability circa 1985 and again circa 1996.

Thereafter housing cycles were manipulated. I guess Bliars house price tripling was just too much to allow a reset after 2007.

So the two golden points were under thatcher and Major. I guess the agenda then switched to boomer asset preservation. So we got the triple whammy...immigration, stop building houses, zirp.

Edited by crashmonitor

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From the article:

"Britain in the Twenties and Thirties was a country in which the population was still coming off the land. Most housebuilding in rapidly expanding cities was carried out by speculative investors for landlords, or by landlords themselves. In most cases, wages were too low to allow people to do anything but rent."

This conflicts with an academic paper I have on my hard drive:

George Speight: "Who bought the inter-war semi? The socio-economic characteristics of new house buyers in the 1930s".

University of Oxford: Discussion Papers in Economic and Social History, Number 38, December 2000.

From that paper (my emphasis):

"The interwar period saw very high levels of private house-building. Private enterprise built 2.88 million houses, compared to a stock of 7.9 million outstanding in 1919. This high level – which was concentrated in the years 1933 to 1938 – was an important episode in Britain’s economic and social development. During the 1930s, house-building accounted for a much higher proportion of GDP than it had during any previous period, and the sharp increase in house-building in 1933 and 1934 was central to the country’s recovery from recession. [...] And since the vast majority of the new privately-built houses were for owner-occupation rather than for letting (due to the decline of investment in property for letting and the readiness of building societies to supply finance on generous terms), the house-building boom led to a significant increase in the incidence of owner-occupation."

And from the conclusion (BTL investors beware):

"But if one is interested in the spread of owner-occupation per se, it is necessary to consider not only the two million plus houses built in the interwar period for owner-occupation, but also the large number of houses – estimated to be in excess of one million – transferred out of the privately-rented sector by sale to owner-occupiers. In a large proportion of these cases, landlords sold their properties in response to the low returns imposed on them by the rent restriction legislation. (Conversely, they were concentrated in the 1920s.) In many cases they could only realise low prices for their properties, and they often sold to the sitting tenants."

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Love the way the article pretends that housing inequality isn't a zero sum game. The boomers struck gold so be happy for them yay! (Even though you're paying for it through the nose)

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They're trying to paint a picture that it was just a lucky one off that won't be repeated so forget it.

Rather than a progression of civic society itself like the slow, stepwise extension of the popular vote, the welfare state, NHS etc.

Exactly, it also paints a picture where the definition of 'luck' is directly related to home ownership. Council housing was for my grandparents' generation more than they could ever have hoped for. My gran lived out the end of her days in a centrally heated well-maintained council flat on a secure tenancy and affordable rent, it wasn't home ownership that defined her 'luck' it was a general acceptance that a civilised society should be able to provide access to basic secure housing for all its citizens, and in the process build a better country than had been before. We've lost something bigger than mass homeownership, we've lost the vision of a better society. (I'm starting to sound like Philip Blond) :blink:

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Exactly, it also paints a picture where the definition of 'luck' is directly related to home ownership. Council housing was for my grandparents' generation more than they could ever have hoped for. My gran lived out the end of her days in a centrally heated well-maintained council flat on a secure tenancy and affordable rent, it wasn't home ownership that defined her 'luck' it was a general acceptance that a civilised society should be able to provide access to basic secure housing for all its citizens, and in the process build a better country than had been before. We've lost something bigger than mass homeownership, we've lost the vision of a better society. (I'm starting to sound like Philip Blond) :blink:

All asset purchases are about timing and luck. Unfortunately those who profit from timing alter the story to skill and time. Equity and property millionaires are the worst culprits.

Edited by crashmonitor

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The OP's telegraph link is interesting in highlighting a so called lucky generation (on housing) and comparing it to these days.

The article has plenty of stuff justifying the headline (Only One Lucky Generation) and describing how one could buy then and how it's more difficult now.

It seems to lack a detailed explanation of all the background reasons why the price of a home is so high now compared to then (for example there's no mention of the rich overseas buyers in London and being allowed to set house prices for people wanting to buy which can also tend to have some ripple effect).

It also lacks any explanation why the price of a home remains so high despite it being so difficult for lots of people to buy now. No suggestions in the article for remedies either.

Edited by billybong

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All asset purchases are about timing not time. Unfortunately those who profit from timing alter the story to skill and time. Equity and property millionaires are the worst culprits.

Agreed, the article is trying to define it as luck, not skill, which is what you are saying. But the problem with that message is that it becomes fatalistic; one's wealth is just an accident of birth, and we should all accept it. It's part of every ideological narrative - returning to the natural state.

"That bit of history where the common man fought for his rights and forced some concessions from the elites was just a blip. Accept it plebs - it's over."

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From the article:

"Britain in the Twenties and Thirties was a country in which the population was still coming off the land. Most housebuilding in rapidly expanding cities was carried out by speculative investors for landlords, or by landlords themselves. In most cases, wages were too low to allow people to do anything but rent."

This conflicts with an academic paper I have on my hard drive:

George Speight: "Who bought the inter-war semi? The socio-economic characteristics of new house buyers in the 1930s".

University of Oxford: Discussion Papers in Economic and Social History, Number 38, December 2000.

From that paper (my emphasis):

"The interwar period saw very high levels of private house-building. Private enterprise built 2.88 million houses, compared to a stock of 7.9 million outstanding in 1919. This high level – which was concentrated in the years 1933 to 1938 – was an important episode in Britain’s economic and social development. During the 1930s, house-building accounted for a much higher proportion of GDP than it had during any previous period, and the sharp increase in house-building in 1933 and 1934 was central to the country’s recovery from recession. [...] And since the vast majority of the new privately-built houses were for owner-occupation rather than for letting (due to the decline of investment in property for letting and the readiness of building societies to supply finance on generous terms), the house-building boom led to a significant increase in the incidence of owner-occupation."

Agreed; a paper (full-website actually) I have shows the absolute house-building growth financed by the Building Societies from the early 30s.

Sure there were loads of speculative developers, who in the boom began cutting corners... wanting to get houses up and sold (profit) asap, which led to concerns, and eventually Parliament taking matter over, by stature, passing the Building Society Act 1939. (Eg need for survey/valuer, same solicitor no longer act for buyer and seller)

This chapter will examine how the lower paid or working classes were able to buy homes in such large numbers. In addition, the reasons why more houses were built for sale, and sold, after 1933 will be examined. In a later part of the work it will be shown that the building industry was able to build something in the order of three million houses, mainly low-cost ones, in the period between the wars. The response of private enterprise was shown in the great expansion of house-building during the decade before World War II when the output of houses reached a level never attained before. The number of private enterprise houses built annually reached a peak of 275,299 in 1935, and production for the five years between 1934 and 1938 averaged 265,000 per annum and costs fell during this period. The lowest point was reached in January 1935 when tender prices for local authority three bedroomed houses averaged £293 or 7s 10p per sq.ft. Material prices were falling while the cost of living and wage rates had declined steadily since 1926. The building labour force increased from 800,000 to 1,000,000 in 1937. A significant factor was the large volume of unemployment among building operators which stood as high as 217,000 in 1932 and never fell below 100,000. This anomaly, which kept the wages of some building workers lower than might be expected, will be explained in a later chapter. Both builders and house-purchasers had the advantage of comparatively cheap money and increased facilities were available from the building societies to enable owner occupiers to buy houses with a small capital outlay. The rate of house-building almost doubled since 1920 despite the fact that the population had been increasing at only half the rate of increase prior to 1914. 'As a consequence the average number of people per house has fallen from 5.4 in 1901 to 4.0 in 1931 down to 3.5 in May 1935' (3).

http://www.pre-war-housing.org.uk/chapter-1.html

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If there’s one thing that drives Generation Rent up the wall it’s hearing stories about their elders snapping up detached Georgian houses in Knightsbridge for a song back in the day. Such stories give the impression that buying a wonderful home used to be a doddle – that they were practically given away for free – only for things to change dramatically and create a situation that is now terribly unfair. For these malcontents I have some words of comfort: apart from one brief period,buying a home has always been hard.

Well that's my view; much much easier to buy. Got this thread bookmarked in my HPC content threads...

May 02 2014

The chief executive of one of Britain's biggest companies, insurer Legal & General, has weighed into the controversial "intergenerational" debate by claiming that baby boomers have "lived for free".

His argument is that house price gains enjoyed by those who bought homes in the 1970s and 1980s have been so great as to entirely offset their mortgage interest costs. In that sense, baby-boomers have paid neither interest nor rent and lived for free.

He painted a dramatic picture of an older generation "sitting on" trillions of pounds worth of housing, while a younger, hard-pressed generation will have to carry debts worth more than a trillion pounds for decades or longer.

http://www.housepricecrash.co.uk/forum/index.php?/topic/198342-baby-boomers-were-handed-free-housing-says-top-insurance-boss/

And the math/wage inflation etc, involved in previous decades, vs now; easy.

Affordability backwards | FT Alphaville

ftalphaville.ft.com › Comment › Blogs

19 Feb 2014

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From the article:

"Britain in the Twenties and Thirties was a country in which the population was still coming off the land. Most housebuilding in rapidly expanding cities was carried out by speculative investors for landlords, or by landlords themselves. In most cases, wages were too low to allow people to do anything but rent."

This conflicts with an academic paper I have on my hard drive:

[..]And from the conclusion (BTL investors beware):

"But if one is interested in the spread of owner-occupation per se, it is necessary to consider not only the two million plus houses built in the interwar period for owner-occupation, but also the large number of houses – estimated to be in excess of one million – transferred out of the privately-rented sector by sale to owner-occupiers. In a large proportion of these cases, landlords sold their properties in response to the low returns imposed on them by the rent restriction legislation. (Conversely, they were concentrated in the 1920s.) In many cases they could only realise low prices for their properties, and they often sold to the sitting tenants."

The re-writing of history with that comment (in Telegraph article) really wound me up. I'm glad you refuted it with your source (and backed you up with my Building Society source... new age of private buyers.. working class... buying at value... in 1930s.

So we've got the baby-boomers sat on £Trillions in Equity (Legal & General Chief)... and those who've been filling their boots into BTL... we just need to keep them under siege.

It's no use offering all buyers of recent years a "Low IQ" excuse - "they couldn't know if buying a house would make money or not" for the very few at break-even or in negative equity. HPCers are going to have to choose sides, if we go into HPC. No one dragged anyone into the bank to pay £400K+ for a terrace in St.Albans.. ok.

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