'Ouses, Greenbelt and stuff
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To be fair, the FT quote is from March last year, so it's entirely possible we've not felt sorry for them once before on here.
They maybe pay £3k per month in student loans, god knows what in rent and will be left behind while others happily entrench their privilege and the system encourages house price inflation particularly in the areas they can't afford despite being relatively high earners with prospects of more.
But still, you can buy something in London for the mortgage they could get - £500k+ surely.
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I agree with your point on how difficult it is to buy a house for the majority, but I don't think that is Rick's point though. His point (unless I have misread it) is that a high income should guarantee you a suitably high value house and very high standard of living. A couple earning £250k and being unable to afford a million pound house (but having multiple options at lower price points, as a theoretical example) is different to a couple with a joint income of say £50k and zero savings, who cannot afford a deposit and therefore cannot buy a house.
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Is the problem in the particular case that they are comparing their buying power to friends/colleagues who have very well paid jobs and inheritance/family money?
I don't see anything particularly unfair that a couple earning £250k might be competing (at the early part of their career) with a nurse on £40k who inherited a couple of hundred thousand - it's not like earning power is a meritocracy.
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Check out property prices in the other financial districts.
Finance doesn’t have to be in London. They could all relocate. Although in all likelihood that would just replicate the problem. Might make London cheaper though.
The above may be fact, or fiction, I may be serious, I may be jesting.
I am not sure. You have no chance.Veronese68 wrote:PB is the most sensible person on here.0 -
Well quite. Hence my 'doing the hours' query. They'll be amazed to learn that people work equally hard at equivalent levels of skill for a fraction of their income.
1985 Mercian King of Mercia - work in progress (Hah! Who am I kidding?)
Pinnacle Monzonite
Part of the anti-growth coalition0 -
Exactly, it's the very top end of what a headteacher in inner London can earn, top end of a Consultant salary in the NHS, the highest ranking army officers or Commander in the Met. All of those take years to obtain and only a few ever make it. Yet here we have a couple earning that it the early years of their career after coming from working class roots and it is being cited as an example of how social mobility is broken.
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No, Pangolian gets it bang on.
You can earn the maxiumum you could realistically earn and it's still not as easy as having inheritance.
Social mobility is in large part about being to out earn your roots. This is a demonstrable example that you can't really, and however much you earn, you'll never keep up with generational wealth.
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All you're doing is highlighting how little public sector people get paid, tbh.
Certainly not the sector you want to be in if you want to own a house that isn't either grim or in a grim location.
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You've just said they are earning over £100k each in their late 20s. Earnings are not the issue here.
1985 Mercian King of Mercia - work in progress (Hah! Who am I kidding?)
Pinnacle Monzonite
Part of the anti-growth coalition0 -
Yes we are agreeing. They should be the issue, as earnings are actually something to do with what you do, not what your parents did.
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They have presumably out earned their roots, if not you'd have to ask what happened to the family silver.
You'll never be able to keep up with generational wealth and high earnings. On a starting wage of £125k, you can definitely keep up with average earnings and a decent inheritance.
There is an element of good fortune associated with high wages as well of course. I think you are slightly blinded to it by your own situation.
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It's not much to do with what your parents did either.
1985 Mercian King of Mercia - work in progress (Hah! Who am I kidding?)
Pinnacle Monzonite
Part of the anti-growth coalition0 -
Average net estate worth for inheritance is around £335,000. Those with parents in the top fifth of earners inherit an average of £372,000. It wouldn't take many years earning in a job with a starting salary of £125k to outperform someone on a 'normal' salary who inherited at even that top 20% average. The issue in this particular case is probably more that those who are in the really high level of inheritance are more likely to walk into one of those high paying City jobs in the first place (and that the couple in question are then comparing themselves with them).
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Sorry please back up that third sentence with some sums. Be sure to include the opportunity cost.
- Genesis Croix de Fer
- Dolan Tuono0 -
Presumably in this situation is it is a 'gift' from parents that we are talking about rather than estate inheritance - most people are going to be well into their 40's before that happens hopefully.
That being so, the amount of money is likely to be a lot less for most people (unless they have very generous parents who sell the house and give the proceeds to their offspring)
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They aren't earning what RC postulates, because with student loan repayments they talk about a marginal rate of 60% including student loan. I suspect this is hyperbole, but that they are somewhere in the 45% rate but below £100k each.
I personally think a season ticket and a nice house in Surrey is in order, which some people aspire to, but if you are surrounded by wealthier people it can distort one's perspective.
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That's how I would see it, and I think your point raises how complex this is to unravel. I suspect when we are talking about the housing boom in London over the last 20 years, this has largely driven by very wealthy people buying up property as investments and also as 2nd/3rd/4th/5th homes and for children/relatives etc. Across most other areas of the UK, I suspect we are talking about the ability to afford a home being in part enabled by a small(ish) 'gifted' deposit.
I guess you could make the argument that either way, both push up housing prices, but the latter I would suggest is far less likely to cause the kind of price increases we have seen in places like London and the SE.
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Normal salary for someone starting their career? Let's say £35k so take home £2300, £125k take home pay £5750 per month. Additional take home £3450 so that's 9 years of earning at just the entry level. The normal earner is likely to increase their earnings by relatively small amounts in comparison to the high earner so that time frame is going to be considerably shorter.
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I’d suggest Manchester as more practical but you propose Rwanda if you wish.
Bottom line, this problem isn’t going away without radical restructuring of the industry. Building more houses won’t cut it as they will be sold at the going rate. Response. - Supply and demand. You need demand to drop in order for any significant change.
Suck it up or “enjoy” a lifetime of whinging.
The above may be fact, or fiction, I may be serious, I may be jesting.
I am not sure. You have no chance.Veronese68 wrote:PB is the most sensible person on here.1 -
If you earn £100k pa you take home £68k. Assuming you need to live in comfort within walking distance of your office, I'd allowed £30k pa for rent. Another £6k for utilities.
This gives £32k left over each year to cover eating and entertainment costs, but big earners need to spend big, so let's assume they manage to spend £87 a day on this and have nothing left over.
Meanwhile inheritance fund kid has received their £50k parental contribution to a deposit.
Is this the proof you need?
The extra step is that the person who is currently earning £100k pa with limited experience will soon be earning £200k pa which is another £50k post tax. The workings above show that it is possible to scrimp by on £100k pa, so this additional £50k in post tax income can then be used as a deposit on a house.
The big difference being when the boiler breaks, the high earner doesn't even notice the costs whilst the low earning inheritance fund kid does.
None of that means I think inheritances should be tax free or that they are good for society.
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Thank you, I thought I'd made some obvious error in what felt like a fairly straightforward comment. Even allowing for the far higher £375k inheritance from a top 20% estate would be covered in the first 10 years of a career with both simply staying at their initial earnings. That's 30+ years where the high salary person is earning significantly more and the person who inherited has used up the cash, then add in it being two people earning at that level and bonuses etc.
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So it takes them 9 years if they maintain the same cost of living as someone earning £35k.
That's tough to do if you want to live somewhere where earning £125k is doable, as has been done a few times on here. Yes some outliers exist, sure, but the bulk are in big cities.
Best case scenario at the end of those 9 years you've got to where they people who inherited were 9 years ago. If they bought a house with it you are now only hundreds of thousands behind as that house has gone up in value.
Lets say you're not aiming for the full £372k figure, just a deposit. It takes several years even for those in the top couple of % of earners. Then you can buy at something like 90% LTV, and the mortgage is say 40% of your outgoings each month.
The folk who inherited got the house several years earlier, for several tens of thousands of pounds cheaper, and paid a much larger deposit. Those differences all compound hugely over time.
- Genesis Croix de Fer
- Dolan Tuono0 -
The basis of your argument then is that house prices keep going up. Through expert investment, I've managed to not make any gains on the property market.
Also, I'm not that convinced that living in London is that much more expensive than living outside London (ignoring property costs and school fees).
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My initial post was on the assumption of all other things being equal as it was responding to the claim that inheritance is more important than earnings. A more valid argument may be that those most likely to inherit a substantial sum are also more likely to get a higher paying job in the first place.
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It doesn't bother me as I still own one property which is the number I need in order to have somewhere to live. In general though it applies to much of London - my colleague moved recently with a similar experience.
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Don't they just need to stop buying so many avocados? 🤔
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As someone who deals with quite a lot of people who have recently bought a house in London, I see very, very few who are first-time buyers buying with inheritance. They do exist, but we are into the properly wealthy houses-in-several-countries crowd, not the children of a couple of retired solicitors. Mostly it's people who got on the ladder long enough ago to have been lifted up by inflation.
1985 Mercian King of Mercia - work in progress (Hah! Who am I kidding?)
Pinnacle Monzonite
Part of the anti-growth coalition1 -
Sorry you've lost me there. You see very few first time buyers buying with inheritance and also most of the people you see are not first time buyers?
- Genesis Croix de Fer
- Dolan Tuono0
