Should You Save or Spend?
Discussion
Shnozz said:
The fascinating thing to me is the division that is being created with regards to what is happening. In very basic terms, for each extra £ spent by those happy to agree to credit, the rich are getting richer and the poor getting poorer, as people pay their enhanced credit fee into the pockets of those lending them to buy their tat. As time goes by, that will only get greater and in a global economy you wonder where that will take us in a 100 years.
That's quite illuminating indeed. We hear all the time snippets in the news about the rich/poor divide increasing. Expanding on your point, it's quite easy to blame the rich, when in some situations it's the poor inflicting the problem (addicted to credit).
DonkeyApple said:
I suspect that is a thread on its own and with no explicit right and wrong answers. In reality it’s going to be as a result of a raft of subtle changes Im sure.
...
But the flip side is the amazing ingenuity that so many show and the absolutely amazing array of opportunities available that were never available before. A Millenial with their head screwed on who gets that the new rules are just the old rules has such breadth of opportunity ahead of them its phenomenal. But those who think the way things work are genuinely new and different and who succumb to the new peer group pressures and the immense marketing machine are sadly just the cattle to be harvested for the machine.
Thanks for the reply, great viewpoint as usual....
But the flip side is the amazing ingenuity that so many show and the absolutely amazing array of opportunities available that were never available before. A Millenial with their head screwed on who gets that the new rules are just the old rules has such breadth of opportunity ahead of them its phenomenal. But those who think the way things work are genuinely new and different and who succumb to the new peer group pressures and the immense marketing machine are sadly just the cattle to be harvested for the machine.
Agree, there are some amazing opportunities for the 'awoke' millennial.
As someone on the fringes of those in question I think there are a few interesting camps and things a foot...
The cost of property is so staggeringly high compared to a more median (not average) income that a fair number of people just take the view they will never be in a position to be a homeowner so why spend years in financial purgatory on the off chance someone in government takes the brave pills and pulls the plug on the property ponzi scheme (or heaven forbid come up with a long term plan for basically nil or slightly negative capital growth after inflation on property, perhaps by signalling in advance a series of minor tax / interest adjustments and actually follow them through when the time comes, I'm thinking of a canadian here :lol. As such they spend money that would traditionally have been put for house deposit / mortgage on lifestyle.
People's aspirations are so much greater in life, Donkey Apple alluded to it and I fear that end result of everyone being told they are super special and worth it, can achieve whatever they want etc. Is likely that absolutely everyone ends up disappointed. Don't get me wrong kids should feel loved and special and encouraged to try hard, it shouldn't be at the expense of someone else however. Humility and respect for others of a different background, be that social / financial whatever and both sides of the coin, Humphry Witthington-Blythe can't help he was born with a million quid much like the son of a milkman can't help it. The world needs a milkman just as much as a millionaire, neither should have to worry about image or how they are treated if they treat others as they would want to be treated themselves. People should do every job with some pride and a bit of effort and be valued for it by society.
However I fear the creeping competitive aspect of needing to be seen to be 'Aspirational', 'Driven', 'Ambitious' etc. be it required on dating sites, CV's, social dinners leads a whole pile of people to stomp on others in vain home of looking more successful than someone else, or to be like someone else. I wish many of my peers would have the confidence to be themselves (after all everyone else is taken right?) rather than who they feel they should be.
However I'm not very good at all of the above, I got asked in a job interview 'where do you see yourself in 5 years time'. I understand the correct answer is to inform my potential boss I'm going to do some sort of Machiavellian scandal to take their and wipe my blade on their M&S suit, inform them I'm going be sitting in the CEO's chair mulling EBITDA with my Civit dung coffee. How did I answer? 'here hopefully' (as in still gainfully employed with the same company. Almost made it, 4 years 4 months...
With all the music and lifestyle about all these designer things, German cars (I understand no-one else makes 'good' ones), people younger than me at work think I am insane for driving around in a 8 year old Vauxhall Astra Estate and that it will leave me woman and childless and with no self esteem. Whilst they fund a car I wouldn't consider myself in a position to afford. That is their choice and I have no issue with what they do with their money but they should treat others who spend their money differently with the same respect. Again I clearly don't do it right, there is a song at the moment on the radio about sitting in a German (car) etc. etc. I now go round telling people I'm 'sitting in a Liverpudlian' (Ellesmere port :lol
I really do agree with other that it is bordering on criminal that some basic life money skills aren't taught at school. Nothing fancy, just basics on mortgages, pensions, life insurance etc.
There is always a balance, in my opinion I try and keep a reasonable buffer between what I earn and what I need to meet the basic outgoings to keep a roof over my head and some long term provision. I accept I'm never likely to have a huge income in retirement, but plan to have enough that the state pension is a bonus if it still around and that I can live out my years without being overly concerned about money. I'm rubbish at spending money on myself because I don't really get any enjoyment out of material things, I'd rather spend the money on enjoyable things for other people such as picking up a dinner tab.
I guess that is partly because I don't really see much in the way of well paid jobs outside of certain geographical areas and industries. Companies are busy binning all of the jobs in the middle, and those at the top tend to have an increasing number of people past traditional pension age clinging on for dear life to fund a lifestyle they can't afford in retirement or simply because they enjoy work. It would be easy to blame them for a lack of mobility and the fact that I am firmly of the opinion 'careers' in the old sense are dead and buried save for a few exceptions. However I suspect I will be the same if I am fortunate to live to that age, be it through choice or necessity.
Anyway I'm rambling, do a bit of both, be happy, do something nice for someone else
The cost of property is so staggeringly high compared to a more median (not average) income that a fair number of people just take the view they will never be in a position to be a homeowner so why spend years in financial purgatory on the off chance someone in government takes the brave pills and pulls the plug on the property ponzi scheme (or heaven forbid come up with a long term plan for basically nil or slightly negative capital growth after inflation on property, perhaps by signalling in advance a series of minor tax / interest adjustments and actually follow them through when the time comes, I'm thinking of a canadian here :lol
. As such they spend money that would traditionally have been put for house deposit / mortgage on lifestyle.People's aspirations are so much greater in life, Donkey Apple alluded to it and I fear that end result of everyone being told they are super special and worth it, can achieve whatever they want etc. Is likely that absolutely everyone ends up disappointed. Don't get me wrong kids should feel loved and special and encouraged to try hard, it shouldn't be at the expense of someone else however. Humility and respect for others of a different background, be that social / financial whatever and both sides of the coin, Humphry Witthington-Blythe can't help he was born with a million quid much like the son of a milkman can't help it. The world needs a milkman just as much as a millionaire, neither should have to worry about image or how they are treated if they treat others as they would want to be treated themselves. People should do every job with some pride and a bit of effort and be valued for it by society.
However I fear the creeping competitive aspect of needing to be seen to be 'Aspirational', 'Driven', 'Ambitious' etc. be it required on dating sites, CV's, social dinners leads a whole pile of people to stomp on others in vain home of looking more successful than someone else, or to be like someone else. I wish many of my peers would have the confidence to be themselves (after all everyone else is taken right?) rather than who they feel they should be.
However I'm not very good at all of the above, I got asked in a job interview 'where do you see yourself in 5 years time'. I understand the correct answer is to inform my potential boss I'm going to do some sort of Machiavellian scandal to take their and wipe my blade on their M&S suit, inform them I'm going be sitting in the CEO's chair mulling EBITDA with my Civit dung coffee. How did I answer? 'here hopefully' (as in still gainfully employed with the same company. Almost made it, 4 years 4 months...
With all the music and lifestyle about all these designer things, German cars (I understand no-one else makes 'good' ones), people younger than me at work think I am insane for driving around in a 8 year old Vauxhall Astra Estate and that it will leave me woman and childless and with no self esteem. Whilst they fund a car I wouldn't consider myself in a position to afford. That is their choice and I have no issue with what they do with their money but they should treat others who spend their money differently with the same respect. Again I clearly don't do it right, there is a song at the moment on the radio about sitting in a German (car) etc. etc. I now go round telling people I'm 'sitting in a Liverpudlian' (Ellesmere port :lol
I really do agree with other that it is bordering on criminal that some basic life money skills aren't taught at school. Nothing fancy, just basics on mortgages, pensions, life insurance etc.
There is always a balance, in my opinion I try and keep a reasonable buffer between what I earn and what I need to meet the basic outgoings to keep a roof over my head and some long term provision. I accept I'm never likely to have a huge income in retirement, but plan to have enough that the state pension is a bonus if it still around and that I can live out my years without being overly concerned about money. I'm rubbish at spending money on myself because I don't really get any enjoyment out of material things, I'd rather spend the money on enjoyable things for other people such as picking up a dinner tab.
I guess that is partly because I don't really see much in the way of well paid jobs outside of certain geographical areas and industries. Companies are busy binning all of the jobs in the middle, and those at the top tend to have an increasing number of people past traditional pension age clinging on for dear life to fund a lifestyle they can't afford in retirement or simply because they enjoy work. It would be easy to blame them for a lack of mobility and the fact that I am firmly of the opinion 'careers' in the old sense are dead and buried save for a few exceptions. However I suspect I will be the same if I am fortunate to live to that age, be it through choice or necessity.
Anyway I'm rambling, do a bit of both, be happy, do something nice for someone else
Is it worth having a look at the argument that the cost of property is so or too high?
Arguably the cost of property has fallen dramatically as the cost of the debt has halved to quartered and in many areas the price has remained pretty stagnant.
Prices aren’t running away faster than an average income earner can save a deposit. The competition from the BTL speculator has been nicely hammered by a near unique lifetime experience of the implementation of well thought out and intelligently targeted taxes. City centre living has become the desireable core venue and the prices in most city centres around the U.K. are low.
We can argue that deposits are higher but they aren’t. They are still historically low. It’s just that for a brief and recent moment in time the lending industry ran them far too low. When you look at the market post war this short period as all the carpet bagged building societies undercut to desperately try and survive as banks combined with deliberately lax regulation really was anomalous. In the same period we had all those interest only loans which again artificially boosted the sq footage someone could procure.
Values look high but are costs higher than ten years ago? Or are they actually lower? I can see all too easily that in this period post the house lending insanity of the previous decade that property may look higher cost as for that brief period some people were using their loan repayment money to gear up further to get bigger properties and people weren’t being asked to put down a suitable deposit. And everyone in the U.K. now understands that this was an anomaly and a dangerous and reckless was to govern the property market. But I’m not entirely sure that the cost of property has gone up in many places?
I do think that this view has become a bit of an excuse for two specific groups of people. Firstly those for whom owning has never been a logical possibility due to low income and those who put themselves in the same position by excess consumerism. These two groups are making so much noise that it is hard to see the genuine zone where people are earning enough to historically be able to become home owners, aren’t being frivolous with their income but are struggling to find appropriate accommodation in an appropriate location to where they are earning that income.
The people I know who are younger than me seem to fall into the exact same two groups that we did. Those who don’t go out all the time, don’t buy lots of stuff and have raised the deposit to buy a property and those who do go out a lot, do buy lots of things and complain that property is too expensive. They have the same professional grad incomes.
There are obviously issues to redress in the property market but I feel there has become this all enveloping excuse so as to justify living the disco dream and blaming others.
Arguably the cost of property has fallen dramatically as the cost of the debt has halved to quartered and in many areas the price has remained pretty stagnant.
Prices aren’t running away faster than an average income earner can save a deposit. The competition from the BTL speculator has been nicely hammered by a near unique lifetime experience of the implementation of well thought out and intelligently targeted taxes. City centre living has become the desireable core venue and the prices in most city centres around the U.K. are low.
We can argue that deposits are higher but they aren’t. They are still historically low. It’s just that for a brief and recent moment in time the lending industry ran them far too low. When you look at the market post war this short period as all the carpet bagged building societies undercut to desperately try and survive as banks combined with deliberately lax regulation really was anomalous. In the same period we had all those interest only loans which again artificially boosted the sq footage someone could procure.
Values look high but are costs higher than ten years ago? Or are they actually lower? I can see all too easily that in this period post the house lending insanity of the previous decade that property may look higher cost as for that brief period some people were using their loan repayment money to gear up further to get bigger properties and people weren’t being asked to put down a suitable deposit. And everyone in the U.K. now understands that this was an anomaly and a dangerous and reckless was to govern the property market. But I’m not entirely sure that the cost of property has gone up in many places?
I do think that this view has become a bit of an excuse for two specific groups of people. Firstly those for whom owning has never been a logical possibility due to low income and those who put themselves in the same position by excess consumerism. These two groups are making so much noise that it is hard to see the genuine zone where people are earning enough to historically be able to become home owners, aren’t being frivolous with their income but are struggling to find appropriate accommodation in an appropriate location to where they are earning that income.
The people I know who are younger than me seem to fall into the exact same two groups that we did. Those who don’t go out all the time, don’t buy lots of stuff and have raised the deposit to buy a property and those who do go out a lot, do buy lots of things and complain that property is too expensive. They have the same professional grad incomes.
There are obviously issues to redress in the property market but I feel there has become this all enveloping excuse so as to justify living the disco dream and blaming others.
Edited by DonkeyApple on Saturday 23 June 09:15
Interesting thread...
I think the term saving is used in a way that makes you feel better but may not be the best option. I prefer to replace saving with investing.
So I “invest” in my pension pot. As someone said even with government tax relief annuity rates are not what they were years ago so perhaps it is useful to see if that saving or contributing more to your pension is actually the best in the long term.
I haven’t done the maths recently but using numbers provided here if £500000 pension pot can only buy an annuity of £30k then I can do better with my money and can make those £500k bring in at least £70k a year pre tax... so for me that kind of pension saving is not actually very clued at all!
Appreciate it is easier and safer but there are other ways. Saying that I should say everyone should save for a rainy day and have pension provision. For most the annuity route is the safe easier way but you are not getting best value for pound invested. But suits most people, others are happier to take more risks and perhaps make their pound go further. No right or wrong it’s what fits your personality and attitude towards risk.
For me makes no sense saving for the sake of it. Have 6-12 months for rainy day. After that “invest” your money... investing in a savings account today is quite poor, investing in your pension fund may be ok, then there are other more riskier ways. With cheap money as we have it now it is almost rude not to take advantage and reap the capital gains in 20 years time
I think the term saving is used in a way that makes you feel better but may not be the best option. I prefer to replace saving with investing.
So I “invest” in my pension pot. As someone said even with government tax relief annuity rates are not what they were years ago so perhaps it is useful to see if that saving or contributing more to your pension is actually the best in the long term.
I haven’t done the maths recently but using numbers provided here if £500000 pension pot can only buy an annuity of £30k then I can do better with my money and can make those £500k bring in at least £70k a year pre tax... so for me that kind of pension saving is not actually very clued at all!
Appreciate it is easier and safer but there are other ways. Saying that I should say everyone should save for a rainy day and have pension provision. For most the annuity route is the safe easier way but you are not getting best value for pound invested. But suits most people, others are happier to take more risks and perhaps make their pound go further. No right or wrong it’s what fits your personality and attitude towards risk.
For me makes no sense saving for the sake of it. Have 6-12 months for rainy day. After that “invest” your money... investing in a savings account today is quite poor, investing in your pension fund may be ok, then there are other more riskier ways. With cheap money as we have it now it is almost rude not to take advantage and reap the capital gains in 20 years time
It’s the income tax clawback combined with a forced monthly payment to help discipline that really make a pension wrapper a good element of any long term savings strategy. But being able to remove 25% tax free in your 50s opens up being able to use that money to invest in the BTL market for income. And of course you’re restricted to £40k/year into a pension wrapper with a total of what, £1m now? So any excess can be invested into property or businesses etc.
Each individual has different preferences and needs so you cannot discount any option but for the vast majority of income earners there isn’t the firepower to use BTL or to take on the added risk which is why for most utilising the wrapper is almost always the best route.
Each individual has different preferences and needs so you cannot discount any option but for the vast majority of income earners there isn’t the firepower to use BTL or to take on the added risk which is why for most utilising the wrapper is almost always the best route.
DonkeyApple said:
It’s the income tax clawback combined with a forced monthly payment to help discipline that really make a pension wrapper a good element of any long term savings strategy. But being able to remove 25% tax free in your 50s opens up being able to use that money to invest in the BTL market for income. And of course you’re restricted to £40k/year into a pension wrapper with a total of what, £1m now? So any excess can be invested into property or businesses etc.
Each individual has different preferences and needs so you cannot discount any option but for the vast majority of income earners there isn’t the firepower to use BTL or to take on the added risk which is why for most utilising the wrapper is almost always the best route.
Completely agree. It's going to be extremely difficult to outperform this type of minimum risk retirement saving. Yes, it's possible to outperform it but only by introducing risk to your money. And as you say, great flexibility once you hit 55 for example. Take 25% tax free if you want and let the rest sit and grow. Each individual has different preferences and needs so you cannot discount any option but for the vast majority of income earners there isn’t the firepower to use BTL or to take on the added risk which is why for most utilising the wrapper is almost always the best route.
As a little anecdote, I looked back at my pension statements and only going back 2 years, every £1 put away from my net pay is now worth £4.40....in only 2 years. It's like getting free money, every single month.
DonkeyApple said:
It’s the income tax clawback combined with a forced monthly payment to help discipline that really make a pension wrapper a good element of any long term savings strategy. But being able to remove 25% tax free in your 50s opens up being able to use that money to invest in the BTL market for income. And of course you’re restricted to £40k/year into a pension wrapper with a total of what, £1m now? So any excess can be invested into property or businesses etc.
Each individual has different preferences and needs so you cannot discount any option but for the vast majority of income earners there isn’t the firepower to use BTL or to take on the added risk which is why for most utilising the wrapper is almost always the best route.
Also you could go down the repayment BTL mortgage route and then when the kids are ready to step up the property ladder/get into it you could give it to them. Heck they could become tenants to you at a certain point. Each individual has different preferences and needs so you cannot discount any option but for the vast majority of income earners there isn’t the firepower to use BTL or to take on the added risk which is why for most utilising the wrapper is almost always the best route.
I say this as bank of Mum and Dad is usually needed so this way we’ll wedding honeymoon uni fees first car and house are all covered. You’d likely have to pay anyway ..
DonkeyApple said:
Is it worth having a look at the argument that the cost of property is so or too high?
Arguably the cost of property has fallen dramatically as the cost of the debt has halved to quartered and in many areas the price has remained pretty stagnant.
Prices aren’t running away faster than an average income earner can save a deposit. The competition from the BTL speculator has been nicely hammered by a near unique lifetime experience of the implementation of well thought out and intelligently targeted taxes. City centre living has become the desireable core venue and the prices in most city centres around the U.K. are low.
There are obviously issues to redress in the property market but I feel there has become this all enveloping excuse so as to justify living the disco dream and blaming others.
I quite agree that it is a very convenient excuse for those that can't or won't save / buy etc.Arguably the cost of property has fallen dramatically as the cost of the debt has halved to quartered and in many areas the price has remained pretty stagnant.
Prices aren’t running away faster than an average income earner can save a deposit. The competition from the BTL speculator has been nicely hammered by a near unique lifetime experience of the implementation of well thought out and intelligently targeted taxes. City centre living has become the desireable core venue and the prices in most city centres around the U.K. are low.
There are obviously issues to redress in the property market but I feel there has become this all enveloping excuse so as to justify living the disco dream and blaming others.
I disagree however, wage inflation for the majority over the past decade or so has really at best kept up with inflation excluding housing costs. The increase in house prices since the early 2000s has been very significant. Multiples.
I'm not too up on it as I hit the employment market during the crash but when I started work someone in a senior ICT role that I am now in could expect to earn around £27k in 2007, so lets say it was £22k in 2000, then you could have bought ex council houses for £50k, a nice new wimpy home about 100k. So lets pick somewhere in the middle so you could get a house in relatively recent memory on 4 times multiple on of reasonably good salary that is achievable in your late 20s early thirties - middle management, senior tech, team lead that sort of thing. fast forward to today and that same job pays anywhere from £27-33k round here. Average simple houses are 200k for family capable ones. So that is double the ratio.
The difference in my opinion is that in the past most people could do the housing situation on their own with a bit of luck and a reasonably well paid but attainable job. If you were a could you had options, bigger house, overpayement, house and lifestyle, money away for kids. You could also more feasibly have a parent take several years off to look after young children without financial distress.
Now the general state of play is that you require two incomes to fund a property in many locaitons, a family property in more. The costs of a moving are significant enough that 'moving up the ladder' is waste of time. It doesn't matter as everyone watching changing rooms and homes under the hammer as bought the properties that you possible get an ROI on whilst living there and many many more where they have probably lost their shirt on it in practical terms but as they have an income stream from it believe they are quids in. If you wish children then the reality for many is reliance on parent childcare, or spending most of a salary on childcare. I realise that in the past many people were in similar position with needing parental assistance for that sort of thing. It was however much more likely in the past that your parents lived in close proximity to yourselves. I think that is much rarer now for a variety of reasons.
I completely agree the recent BTL changes are well thought out and having the right effect, more however needs to be done so that housing is reduced from being such a large % of many households outgoings allowing for investment in other things such as small businesses, pension funds etc etc that are all more productive to society and the country than watching house prices increase and falsely feeling your net worth has increased as result.
Unless you own more than one property, which is still a minority in real terms and unless you are downsizing or moving to a cheaper location, it is really not a net gain as the new property of similar characteristics will be a similar price to the current property.
When you add in the to wage inflation that there seem to be a large amount of low earning but important jobs, and then the number of positions things out very rapidly once you get above team leader sort of thing with all the flattening. The result being more people can expect go back 60 years or so and have the same job and relative salary for the majority of their working life if not all.
There is a girl at my company who is in her 20's and lived with her boyfriend at parents to be able to save everything they could for a deposit on their first house. They are married now and have just moved into a lovely barn conversion with huge garden in a sought after village location.
Another lad, the same age, stayed living with mates in student digs to save money for a deposit. He bought a house in a nice area of Nottingham AND rents a flat in London with his girlfriend (he lives and works between the two cities).
Then there is another girl with a husband and two kids who bought a house in a market town in the early/mid twenties and at 31 has just bought their 'forever' house (again a barn conversion with a large garden in a sought after village).
Both of the first two joined us straight out of uni and the other relocated from London. What they all have in common is they have got their heads screwed on, work hard and save money.
Of course we have other the same age who have credit cards, car finance and all the latest toys whenever they come out and moan they can't get on the property ladder. These ones also do the bare minimum in the office and so don't benefit by regular salary increases like the others.
The thing is you can spot each type very quickly and we no longer take on people who fall into the second camp.
So it is all about attitude to succeed in both work and life in general which, amazingly, some people just do not have.
Another lad, the same age, stayed living with mates in student digs to save money for a deposit. He bought a house in a nice area of Nottingham AND rents a flat in London with his girlfriend (he lives and works between the two cities).
Then there is another girl with a husband and two kids who bought a house in a market town in the early/mid twenties and at 31 has just bought their 'forever' house (again a barn conversion with a large garden in a sought after village).
Both of the first two joined us straight out of uni and the other relocated from London. What they all have in common is they have got their heads screwed on, work hard and save money.
Of course we have other the same age who have credit cards, car finance and all the latest toys whenever they come out and moan they can't get on the property ladder. These ones also do the bare minimum in the office and so don't benefit by regular salary increases like the others.
The thing is you can spot each type very quickly and we no longer take on people who fall into the second camp.
So it is all about attitude to succeed in both work and life in general which, amazingly, some people just do not have.
Welshbeef said:
Also you could go down the repayment BTL mortgage route and then when the kids are ready to step up the property ladder/get into it you could give it to them. Heck they could become tenants to you at a certain point.
I say this as bank of Mum and Dad is usually needed so this way we’ll wedding honeymoon uni fees first car and house are all covered. You’d likely have to pay anyway ..
This is what I have done but you sacrifice yield if you buy a pair of flats that you deem to be in a suitable location for your children. I paid a premium for them to be a short walk from a very useful tube station and in a secure development. The flip side is that it does mean they are rented to Japanese corporates which keeps voids to next to nothing, default risk about as low as it can go and really high quality tenents. At the same time due to the rising taxation on investment property I wouldn’t go down this route unless there was excess money after conventional pension wrapper contributions as the uplift from the tax rebate on each GBP simply cannot be beaten. The risk within that being what you then chose to invest in. I’m not a fan of fund managers and I’m not interested in stock selection so simply buy prime ETFs such as the FTsE iShare. It means I cut out manager costs and hidden fees and keep that money to myself. I say this as bank of Mum and Dad is usually needed so this way we’ll wedding honeymoon uni fees first car and house are all covered. You’d likely have to pay anyway ..
I could het higher returns in the short run using the right funds but frankly they will always die off as either their growth market goes ex growth or their fund manager finally runs out of luck and I’m just not able or willing to play the game of guessing when that will be and constantly rebasing my investments.
DonkeyApple said:
I could het higher returns in the short run using the right funds but frankly they will always die off as either their growth market goes ex growth or their fund manager finally runs out of luck and I’m just not able or willing to play the game of guessing when that will be and constantly rebasing my investments.
Scottish mortgage FTW 
trowelhead said:
DonkeyApple said:
I could het higher returns in the short run using the right funds but frankly they will always die off as either their growth market goes ex growth or their fund manager finally runs out of luck and I’m just not able or willing to play the game of guessing when that will be and constantly rebasing my investments.
Scottish mortgage FTW The nice properties don't offer a decent enough return when all associated costs are factored in.
fitz1985 said:
DonkeyApple said:
Is it worth having a look at the argument that the cost of property is so or too high?
Arguably the cost of property has fallen dramatically as the cost of the debt has halved to quartered and in many areas the price has remained pretty stagnant.
Prices aren’t running away faster than an average income earner can save a deposit. The competition from the BTL speculator has been nicely hammered by a near unique lifetime experience of the implementation of well thought out and intelligently targeted taxes. City centre living has become the desireable core venue and the prices in most city centres around the U.K. are low.
There are obviously issues to redress in the property market but I feel there has become this all enveloping excuse so as to justify living the disco dream and blaming others.
I quite agree that it is a very convenient excuse for those that can't or won't save / buy etc.Arguably the cost of property has fallen dramatically as the cost of the debt has halved to quartered and in many areas the price has remained pretty stagnant.
Prices aren’t running away faster than an average income earner can save a deposit. The competition from the BTL speculator has been nicely hammered by a near unique lifetime experience of the implementation of well thought out and intelligently targeted taxes. City centre living has become the desireable core venue and the prices in most city centres around the U.K. are low.
There are obviously issues to redress in the property market but I feel there has become this all enveloping excuse so as to justify living the disco dream and blaming others.
I disagree however, wage inflation for the majority over the past decade or so has really at best kept up with inflation excluding housing costs. The increase in house prices since the early 2000s has been very significant. Multiples.
I'm not too up on it as I hit the employment market during the crash but when I started work someone in a senior ICT role that I am now in could expect to earn around £27k in 2007, so lets say it was £22k in 2000, then you could have bought ex council houses for £50k, a nice new wimpy home about 100k. So lets pick somewhere in the middle so you could get a house in relatively recent memory on 4 times multiple on of reasonably good salary that is achievable in your late 20s early thirties - middle management, senior tech, team lead that sort of thing. fast forward to today and that same job pays anywhere from £27-33k round here. Average simple houses are 200k for family capable ones. So that is double the ratio.
The difference in my opinion is that in the past most people could do the housing situation on their own with a bit of luck and a reasonably well paid but attainable job. If you were a could you had options, bigger house, overpayement, house and lifestyle, money away for kids. You could also more feasibly have a parent take several years off to look after young children without financial distress.
Now the general state of play is that you require two incomes to fund a property in many locaitons, a family property in more. The costs of a moving are significant enough that 'moving up the ladder' is waste of time. It doesn't matter as everyone watching changing rooms and homes under the hammer as bought the properties that you possible get an ROI on whilst living there and many many more where they have probably lost their shirt on it in practical terms but as they have an income stream from it believe they are quids in. If you wish children then the reality for many is reliance on parent childcare, or spending most of a salary on childcare. I realise that in the past many people were in similar position with needing parental assistance for that sort of thing. It was however much more likely in the past that your parents lived in close proximity to yourselves. I think that is much rarer now for a variety of reasons.
I completely agree the recent BTL changes are well thought out and having the right effect, more however needs to be done so that housing is reduced from being such a large % of many households outgoings allowing for investment in other things such as small businesses, pension funds etc etc that are all more productive to society and the country than watching house prices increase and falsely feeling your net worth has increased as result.
Unless you own more than one property, which is still a minority in real terms and unless you are downsizing or moving to a cheaper location, it is really not a net gain as the new property of similar characteristics will be a similar price to the current property.
When you add in the to wage inflation that there seem to be a large amount of low earning but important jobs, and then the number of positions things out very rapidly once you get above team leader sort of thing with all the flattening. The result being more people can expect go back 60 years or so and have the same job and relative salary for the majority of their working life if not all.
The ‘need’ for two incomes is interesting as how much of that is down to wanting a larger property in a better location than maybe just one salary allows? There is definitely an element in this of people just wanting more than they are actually worth. And there is also the aspect that a lender does really like having two people on the hook for their loan.
On the flip side, lenders have reverted to the normal practice of seeking a credible deposit, having the loan repaid and pricing their debt against a customer’s actual ability to repay it. All actions that favour the saver and move the spender further away from the concept of home ownership but then that is a good thing as it makes the market more stable and safer.
I agree that beyond that property has gone up rapidly in value but that is purely a function of the increase in money supply. Increasing deposit requirements, restricting multiples and taxing BTL have all reduced that money supply markedly and for the better. This slows inflation. Enforcing AML laws on London brokers has also all but ended the flood of bent money into the premium residential market that for a long time had a hideous impact on the country as the ripple effect pushed up prices in the regions beyond what regional incomes could easily afford.
The next three big changes that will diminish purchasing power are the end to QE, the increasing of debt costs and also the dying off of the Boomers and the splitting of their estates between the taxman and siblings.
The latter is the really interesting one as you can predict quite accurately the rate of this die off and the supply of their properties into the open market. We may all be living longer but that doesn’t stop the rate of supply but just pushes it further out. Just like the massive increase in dying celebs that the media covered strongly this is a reflection of what we will see among the Boomers as a whole so we know that supply of family homes is going to begin increasing rapidly and has the potential to collapse the market at that level if there are not enough buyers to match demand with this supply. This is why we are in a sticky position with regards to building new family homes, we actually know that by the time we’ve started delivering that new supply the increase in supply of existing homes will be growing. And excess supply is what triggers crashes. And then you have the problem that incentivising the older to downsize puts pressure on the lower end of the market but that is an area where new supply is arguably needed.
djc206 said:
Welshbeef said:
Where does £500k five a £30k a year pension?
It doesn’t it gives a £10k pension (annuity with spousal cover too)
So yes you’d need £1.5m pension pot to give a £30k pension
Don’t buy an annuity then? Just draw down and it will give you significantly more than £10kpa.It doesn’t it gives a £10k pension (annuity with spousal cover too)
So yes you’d need £1.5m pension pot to give a £30k pension
If you draw down £30k a year from your “pot” in just under 16 years it would be empty ie 81 years old and having to survive on State pension only.
Shnozz said:
True though isn't it. My summing up on BTL was that the big margins were in scummy properties but then there are the financial risks and hassle of void periods and scumbag tenants and frankly I would rather spend my time earning money doing something other than dealing with such types.
The nice properties don't offer a decent enough return when all associated costs are factored in.
When you talk scummy properties/void periods/scumbag tenants do you mean properties like these:The nice properties don't offer a decent enough return when all associated costs are factored in.
https://www.rightmove.co.uk/property-to-rent/find/...
....or just ALL lo-rent properties, or property that's cheap to buy?
(just genuinely wondering, so no need to get angry!)
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