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John The Pessimist

The Problems With Downsizing.....

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Article and comments made me want to be sick, bloody boomers blaming everything on things like stamp duty and not acknowledging the reason stamp duty is so high is because house prices are too high.

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My heart bleeds for these poor boomers.

It's just a slowly deflating bubble. Got a long long way to run.

Bet they'd be disgusted with an LVT.

Edited by Si1

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Well some hpcers also feel for them, even before the stamp duty easing for lower priced homes, and the IHT carry-over. Woe them downsizing and releasing hundreds of thousands of pounds + luxury new house. :rolleyes:

It is expensive to downsize. Moving down incurs all the moving costs associated with moving up. Selling a £1m property to move into a £600K property will cost over £40K when all fees and taxes are considered. In effect you lose 10% of the potential gain. I don't believe people are refusing to downsize, it's just that they lack any incentive to do so.

Aside from reducing IHT liability, it doesn't make much sense to downsize.

Moving from a £1million property to a £600K property costs £24K Stamp duty, £12K Estate agent fees (assuming 1% +VAT) and probably another £4K in various other costs. So that is £40K off the £400K "profit".

I await the time just a few more boomers at the margin decide to downsize and accept much lower prices from a market with fewer upsizers remaining... shaken out of their ridiculous complacency.

Bringing wider market values down for other boomers with homes they believe are locked-in value protected £750K homes. More incentive growing for some, including BTLers with homes on at £695,000 and facing challenging market conditions, to sell and accept lower prices.

Article below was in Sunday Times http://www.thesundaytimes.co.uk/sto/business/article1419856.eceand behind the paywall, but is also at his own website.

Sunday, June 08, 2014
Bank grapples with a strange kind of housing boom
Posted by David Smith at 09:00 AM

[...]Why is it happening? Older people looking to downsize appear reluctant to do so, perhaps because the returns they can get on the savings they unlock are so abysmal, and cannot compare with the strongly rising price of the property they own. Instead of being a source of properties for sale, they have become the so-called “bed blockers” of the housing market.

http://www.economicsuk.com/blog/002028.html

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I like the unquestioned mantra from both the times and telegraph that houses have superior returns to every other option

It's so complacent it's untrue.

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satch. Yet they all too often champion buying to younger generations, can't go wrong with property, ramping their own position.

Daily Mail

Average UK house price to hit £780,000 by 2040, says leading think tank

Kilo Charlie, My World, 9 hours ago
We purchased a property in 1983 for £72,000.........today it's worth £650,000 plus. It's certainly possible and quite likely.

Sam, Bucks, 3 hours ago
Bought house in ,74 for 16k added extention about £8k now valued at £480k you do the maths?

Surprised me no one flinched at the £695,000 asking price of Mark 118's house. Six hundred and ninety five thousand pounds. In some outer Norwich area. Bubble.

I guess many hpcers are at least partly coarsened to the market around us, after all these years. A time will come when some will have to sell and accept lower prices, bringing all values down, and hopefully it will be to a market where there's fewer would-be / proceed-able upsizers.

An existing paradigm is seldom dispelled by evidence alone. As Keith Thomas has written, "Such systems of belief possess a resilience which makes them virtually immune to external argument." A people whose culture grossly misinterprets certain facts will not necessarily reason their way to a more encompassing world-view until forced to do so by the brunt of economic necessity or military defeat. Reason does not alter values.

A well-known quote from economist Rudiger Dornbusch goes as follows: “In economics things take longer to happen than you think they will, and then they happen faster than you thought they could.”

For older owners, housing has been a substitute for financial savings. Before these paper windfalls generated from the seventies can be converted to cash, however, new buyers must be found. Most of these buyers will not have sufficient cash reserves to pay 50 percent down.

Therefore mortgage lenders will have to absorb a growing share of the housing market risk for prices to remain stable. They are unlikely to do this. Losses on real estate loans will be the main cause of increasing losses in the banking system.

Creditors normally react to rising losses by curtailing lending, imposing higher qualifications on borrowers, and raising loan rates higher than they would be otherwise.

As this trend becomes apparent, ageing home-owners, who are depending on their homes to provide retirement security, will try to sell. This will push prices down further. Paul Hewitt estimates that "the predicted trade-up market" may not materialise if a growing number of buyers elect to remain in housing they consider adequate, rather than risk their equity in large luxury homes.

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satch. Yet they all too often champion buying to younger generations, can't go wrong with property, ramping their own position.

Surprised me no one flinched at the £695,000 asking price of Mark 118's house. Six hundred and ninety five thousand pounds. In some outer Norwich area. Bubble.

I guess many hpcers are at least partly coarsened to the market around us, after all these years. A time will come when some will have to sell and accept lower prices, bringing all values down, and hopefully it will be to a market where there's fewer would-be / proceed-able upsizers.

Love the way they say'you do the maths' but owing to the money illusion and ignorance on their part, THEY clearly can't!

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Since when did the seller pay stamp duty? I'm sure when I moved last time the buyer paid it.

The higher the stamp duty, the lower the house price. Because smaller amount of total afforded by buyer in leveraging remaing deposit funds goes to seller rather than government. i.e. duty is an economic burden to seller not buyer and idea that SDLT is set against downsizers is more or less true. Even if they way they describe it is bo11ox and lower duty offset by burden of higher prices for everyone else anyway.

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Stamp Duty is a crap excuse given the amount of profit they make from the sale. "I don't want the profit because the stamp duty's too high" - WTF? Is the boomer mantra.....profit's vanity, stamp duty's sanity or something?

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It's a w8nky article in so many ways.

1) Capital Gains is not paid on the house you live in, so no impediment to downsizing.

2) Stamp Duty is not that huge, No impediment to your last move.

Probably these people have an emotional attachment to their current house?

However Stamp Duty is a pain for people of working age who have to move for job reasons.

If it's a big house it will probably eventually end up in the hands of builders, who may convert it into multiple leasehold flats, and retain title to the freehold. :wacko:

Downsizing Fail:

My uncle sold his semi in Surrey, and moved to Darlington, where he didn't know anyone. Probably contributed to his early death.

Downsizing Success:

Ex GF's parents sold up in SE London, and moved to rural Yorkshire, and loved it.

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So.....they can afford NOT to downsize - what does this signal to the government?

How to win the next election?

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massive generalisation re boomers (you are only talking about the rich ones who own homes in the southeast)

should I decide to downsize (already in a 3 bedder) - a 2 bedroom house often costs as much as a 4 bedder

often it is a case of downsizing but not downvalueing (the cost of the new house plus the associated costs will be the same as the monies received for the old house - remember they cannot take out an extra mortgage :o )

part of the answer would be to let savings rate drift upwards and house prices downwards - it would make downsizing/downvalueing infiintely easier.

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massive generalisation re boomers (you are only talking about the rich ones who own homes in the southeast)

should I decide to downsize (already in a 3 bedder) - a 2 bedroom house often costs as much as a 4 bedder

often it is a case of downsizing but not downvalueing (the cost of the new house plus the associated costs will be the same as the monies received for the old house - remember they cannot take out an extra mortgage :o )

part of the answer would be to let savings rate drift upwards and house prices downwards - it would make downsizing/downvalueing infiintely easier.

Olliegog. Boomer thread. Olliegog.

I'm thinking of the ones in the Northwest in homes worth fortunes, who tell my family there will be no HPC and to look to get on the ladder through looking for value around the Adswood tip in Stockport. Whilst they rattle around in homes worth £600K-£1.25m. And the 'no monies released in downsizing' argument again, aww.

The only group I know of enjoying preferential savings rates are boomers - although I've not looked into it that closely for it winds me up.

From the article..

- “Absolutely. There’s no question. As I see it, house prices are going up by 5pc to 10pc a year, so it makes complete financial sense to stay put. Nothing else offers those returns – let alone those returns free of capital gains tax. And we can now pass on a bit more to the children before being clobbered with death tax.”

And so it went: all three couples would like to downsize, none of them will.

Gains from the margin, including sloshy foreign money in recent years, Timak parents-in-law doubling down into BTL. When point comes there are no upsizers left, big HPC needed to destroy their complacency.

Edited by Venger

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- “Absolutely. There’s no question. As I see it, house prices are going up by 5pc to 10pc a year, so it makes complete financial sense to stay put.

That bit stood out for me when I read it. Largely because the mentally that makes someone hold onto an asset when it's rising in such a fashion is also the same profile of person to fail to get rid when the worm turns. Chasing the market all the way down.

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a 2 bedroom house often costs as much as a 4 bedder

Really?

Got any examples of this?

Have we all misunderstood the housing ladder all along?

All those boomers telling us to buy 2-bed flat, HPI it for a few years, then go for a 3-bed semi....NO...NO...NO....all we had to do was buy the 4-bed first of all - because they're "often" as much as a 2-bedder.

Love the boomer thinking here - black is white when you want it to be. Suddenly 2-beds are the same price as 4-beds, so not worth downsizing - because ...

the cost of the new house plus the associated costs will be the same as the monies received for the old house

....wow! Never knew that (genuinely). We imagined all along that 2-bed properties were cheaper than 4-bed properties, but it turns out they weren't. No such thing as downsizing - doesn't exist. How can it? 2-bed properties are "often" as expensive as 4-bed properties.

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That bit stood out for me when I read it. Largely because the mentally that makes someone hold onto an asset when it's rising in such a fashion is also the same profile of person to fail to get rid when the worm turns. Chasing the market all the way down.

I hope so, and that it will be decided for the majority by just a few selling for much lower at the margin.

If it goes that way, then no doubt there will be a lot of squealing at their loss of housing equity wealth. The gains are incredible since the 70s, and some of them expect even loads more HPI.

It's also a motivation identified by David Smith, Economics Editor of The Sunday Times. Remember this if and when the market turns. They had their chance to sell, in this silly low inventory market, to protect HPI / allow banks to smooth out their positions into it past 5+ years.

Thursday 13 August 2015

The number of houses for sale is at its lowest level since records began in 1978, new data reveals.

http://news.sky.com/story/1535150/housing-shortage-sends-prices-north

Sunday, June 08, 2014

Bank grapples with a strange kind of housing boom

Posted by David Smith at 09:00 AM

[...]Why is it happening? Older people looking to downsize appear reluctant to do so, perhaps because the returns they can get on the savings they unlock are so abysmal, and cannot compare with the strongly rising price of the property they own. Instead of being a source of properties for sale, they have become the so-called “bed blockers” of the housing market.

http://www.economicsuk.com/blog/002028.html

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Down sizing doesn't work. If I look for a one bedroomed bungalow I find it's the same price as my three bedroomed detached house.

If I look for a cheaper house than mine I find it's the same size as I have already got. It's other factors that make the house cheaper no the size.

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Have we all misunderstood the housing ladder all along?

All those boomers telling us to buy 2-bed flat, HPI it for a few years, then go for a 3-bed semi....NO...NO...NO....all we had to do was buy the 4-bed first of all - because they're "often" as much as a 2-bedder.

:lol:

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Down sizing doesn't work. If I look for a one bedroomed bungalow I find it's the same price as my three bedroomed detached house.

If I look for a cheaper house than mine I find it's the same size as I have already got. It's other factors that make the house cheaper no the size.

I'm going to tell my EAs this on Monday - ready to put a bid on a 4-bed property - my offer will be the same as a 1-bed property nearby. I think we've solved the problem, guys.

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Down sizing doesn't work. If I look for a one bedroomed bungalow I find it's the same price as my three bedroomed detached house.

If I look for a cheaper house than mine I find it's the same size as I have already got. It's other factors that make the house cheaper no the size.

This is just one retirement apartment in a prime South Manchester area. Houses for sale 1/4 mile out on that postcode. Have to be 60 years+ to live there.

http://www.rightmove.co.uk/property-for-sale/property-23835783.html

http://www.rightmove.co.uk/property-for-sale/property-53797118.html

http://www.rightmove.co.uk/property-for-sale/property-30685734.html

eek but it can be cleared out... it's their home and they obviously like it that way.

http://www.rightmove.co.uk/property-for-sale/property-49317848.html

And they can look well-smart when little bit of money spent to modernise.

http://www.rightmove.co.uk/house-prices/detailMatching.html?prop=23048778&sale=48143975&country=england

1 bed service charge around £141 per month + all the add ons you get for the service charge.. in prime South Mcr area and next to all the good stuff, inc shops and GP surgery.

http://www.housingcare.org/housing-care/facility-info-16046-rostherne-court-altrincham-england.aspx

1 beds were selling for around £60K-£70K in 1999.

39 apartments. Built in 1989.

= 22 one-bedroom apartments, and 17 two-bedroom apartments

All 39 apartments appear to be limited mobility properties

New residents accepted from 60 years of age. Both cats & dogs generally accepted, but not to be replaced (permission required)

Edited by Venger

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Big houses are a PITA to heat, maintain, and pay tax (which I'm sure will increase) on. Even if you made no money on the downsizing in terms of capital, you'd gain on cashflow.

That said, I think all the reasons given are just excuses for inertia and emotional attachment. Neither of which are inherently bad reasons for staying put.

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Big houses are a PITA to heat, maintain, and pay tax (which I'm sure will increase) on. Even if you made no money on the downsizing in terms of capital, you'd gain on cashflow.

That said, I think all the reasons given are just excuses for inertia and emotional attachment. Neither of which are inherently bad reasons for staying put.

Fine. So long as they don't complain into HPC about their loss of 'savings' from insane valuations.

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