Diesel

When I bought my first house [£19k] I was on £7k pa. When I bought my next one I think I was on £25k and it cost £70k for a 3 bed semi. All well and good on affordability and salary multiples.



Looking to buy a similar 3 bed semi again some 7 years later and they are now selling at £250k. Now 3 times salary at a £70k asking price previously was fine but, say, 4 times salary when asking £250k will not add up for 99% of the population. And it’s just a boring 3 bed semi in Cardiff FFS. I’m however alright Jack and can afford it as I am lucky enough to have been on the housing ‘ladder’ elsewhere during those 7 years away, but what on earth are our kids going to do to set up home? The only option is get a £65k pa job at 23 or sit back and wait for an inheritance that will get severely chewed up by inheritance tax…



Surely it will all go into reverse???

Puff The Magic Wagon!

iTrader: (2)

What you do as a responsible parent is invest now in property so that you have more than 1 house per sprog which you hand over in name when tax implications low/non-existant & then by the time they are able to flee home, it'll be worth something so they can either go sell it or live in it & leave you in peace

rr_ww

Joking aside, its a serious concern to myself, and probably thousands of others.

The answers are well documented, but no one wants to take the first step.

Diesel

Puff - you seem to be predicting some drop in taxes...? What planet you on

Lum

Bugger the kids (oo-er) how are me and my GF going to buy a house to raise them in in the first place!

Jerome

It isn't just our kids that we should worry about:

http://news.bbc.co.uk/1/hi/uk/4568121.stm

hades

I still believe that half the issue is inheritence to start with. How many people on here had great grandparents who owned their own houses? I'd guess relatively few. IMHO, we are getting close to the stage where the first "generation of common home ownership" are beginning to die and pass on houses to kids. With big inheritences flying around - even with IHT - it's not so surprising that the prices stay high. I may be wrong, just a pet theory of mine.

Of course it will level out; due to IHT etc, it can't keep going up. Not convinced it will crash down though. Again, I may be wrong.

jameswrx

iTrader: (4)

stop producing kids, easy

davyboy

Easy, when I get my inheritance, instead of paying my mortgage off or buying that 2nd property, I'll give the money to my kids when they need it......rather than when I die, when its of little use.

Lum

Not so fast, if that happens then who is going to fund the public purse when you are a pensioner?

We need people to continue producing kids (who aren't chavs as most chav kids don't contribute to the economy when they grow up) in order to support the economy, if people stop having kids because they can barely afford a mortgage then the pensions time bomb is going to get a hell of a lot worse, yet another example of the government ruining this country.

Oh dear, pensioners and government mentioned in the same post, Pissy will be here soon.

Soulgirl

An interesting thread. I was thinking exactly the same in respect of my 14 year old and my 10 year old.

4 years ago (just) I bought a 3 bed semi for 115k; 8 years prior i bought a detached 3 bed bungalow for 60k, 4 years before that i bought a 2 bed semi for 47k and 6 months prior to that i bought a flat for 33k

Today, my stupid 3 bed semi, bought for 115 4 years ago is priced at 180k.
A pathetic 1 bed cluster house - to you and me thats a ****ing one bed flat with a staircase, is priced at 131950. Where the fukc did they pick that price from?

How on earth can any hard working single person or harder working couple afford a mortgage based on that pie in the sky price?

No wonder mortgages are offered at 5 x the wage for 40 years.

****ing greedy realators and sellers making it impossible for first time buyers. To their end though, there are less and less people able to buy the on-sale properties let alone move up the chain.

Puff The Magic Wagon!

iTrader: (2)

I dunno m8 - seems common sense to me. You can gift a certain amount a year tax-free. There's rules about juveniles earning income & if you buy it now whilst relatively cheap, then when it get's it's mortgage paid off, it'll be worth a tidy sum. Rent to own.

I'm no tax expert but there has to be a mechanism to make it work.

FB!!!!!!!

Soulgirl

The only mechanism that makes it work is buying bricks and mortar and sitting on it... these days, not for long it would seem.

I see it as this. If you want your kids to own property, you have to buy it yourself and give it to your kids providing you enough years have passed so that you can afford to lose that initial outlay. Otherwise, hopefully, the mortgage you pay is affordable to them so that you pass it on all and sundry.

jfrf

kids will be able to afford it by their parents dropping dead. The kids then inherit their parent houses or proceeds.

A second point is that although the salary to house price ratio is very high at the moment, interest rates are very low. Its hard to imagine that 15-20 years ago, mortgagaes were more like 12 % rather than 6% now

Puff The Magic Wagon!

iTrader: (2)

My dad is 87 & my mum is 77 - I'm 40. Still not looking like inheriting for a while (thank goodness). My daughter (6) could be 25 before I inherit anything & then I'll only be 60...

Mungo

The 60-80 year old generation is sitting in property worth £billions. When they start to die off, this property will be inherited by my generation. As most people won't inherit the property alone (i.e. most inheritances will be split at least 2 ways - 3 if you include Gordie's share), most of them will need to be sold to split the cash. This will lead to a glut of (mainly) high-end properties coming on to the market, and due to over-supply the prices will drop. This will have a knock-on effect on the lower end of the market.
Any economists out there care to comment/disagree?

Jerome

Ah, so we just sit around paying off someone elses mortgage (renting), until both our parents die. Only for me, after IHT, any proceeds are divided at least 4 ways (presuming they don't leave anything to the grandchildren).

I presume nobody clicked on the link in my previous post, so here is some of the pertinent text from it:


The number of places in which public sector key workers cannot afford to buy a house has almost doubled in three years, according to research.

Nurses are worst off, being priced out of the market in 93% of UK towns, said the Halifax.

Gerrards Cross, Buckinghamshire, is the most unaffordable town, with the price of the average house now 26 times higher than the average nurse's salary.

The study also said problems were no longer confined to the South East.
The number of towns in the north where property is too expensive for nurses rose from 13% in 2001 to 79% in 2004, it suggested.

fast bloke

IHT is a voluntary tax. With a little planning there should be few people who actually need to pay IHT.
There are many many ways to avoid paying. You can simply sign a property over to kids when you feel they are old enough. If you manage to survive for 7 years then they won't have to pay IHT on the gift. (Don't do this with your main property though - they could leave you homeless.)
You could set up a trust, make a personal gift to the trust of the amount of the mortgage required to buy a property, buy a property and then secure a normal mortgage on it, borrow the money back from the trust at a reasonable rate (say 10%) to be repaid in full with accrued interest on your death. Given that your debts would be paid from your estate before IHT was calculated and starting with a purchase and mortgage of 100k now - if you manage to survive 30 years, you will owe the trust somewhere in the region of £2,000,000.00. In the interim period, the trust will have been letting the house, or you will have been making gifts from income, so the original mortgage would hopefully be paid. Assuming the trust can let the property for enough to cover the mortgage, the total cost to you is £0.00 - The total saving for your kids is not to far away from £800,000 over 30 years and they get a house that is probably going to be worth 300-400k when they are 18/21/25. This is a basic scenario - if you think you are going to have an issue with IHT, start planning now - The more time your plan has to work, the bigger the reduction in any future liability

Diesel

>>You could set up a trust, make a personal gift to the trust of the amount of the mortgage required to buy a property, buy a property and then secure a normal mortgage on it, borrow the money back from the trust at a reasonable rate (say 10%) to be repaid in full with accrued interest on your death.<<

Let me get this right, you pay into a trust £100k from your savings [] and then continue as normal getting a building society mortgaged house. You then take the £100k out of the trust and pay off the mortgage. After that you just sit back and make no repayments whilst the trust accumulates huge compounded interest due to the debt.

Q: who gets all that lovely lolly in the trust when you die, and why does it not have IHT!

fast bloke

fairly close - you don't need 100k to start with - you set up the trust with your kids as beneficiaries. You remortgage/use savings etc to raise 100k (you can do it for as much as you like) you make a gift to the trust of the 100k. The trustees use the 100k to buy a property. Once the trust has property, it can use the property as security for a loan of 100k, which it subsequently lends to you. (This seems complicated, but you only need to do it so that you can show the gift having been made to the trust, and lenders are iffy about lending money to trusts with no history)
You use the 100k to pay off the 100k you gifted to start with. At this point the trust has a property with a mortgage secured on it and you owe the trust an imaginary 100k. The property can be let to pay the mortgage, or you can make further gifts from income to the trust to pay the mortgage.
By the time you die, you owe the trust a fortune (2 million in this case) - your debts are paid off from the value of the estate before your IHT liability is calculated, so the trust gets 2 million, or all of your estate if it is worth less. As the trust has been set up with a gift more than 7 years previously it is not liable for IHT, as you are considered to have given the money away.
The beneficiaries get the money when you die - these are named when you set up the trust.

p.s. - Don't try this at home kids - there are people who do nothing but IHT planning for a living - I think Tiggs does. Every situation would have a different solution, but the only way you (or your kids) should be paying IHT is if you don't take steps to avoid it

Petem95

fast bloke - a lot of these IHT tax avoiding loop-holes were closed a few months back, however Im sure there are still ways of avoiding it. There was a good article on it on the BBC website at the time.

Its in the governments interest to maintain high house prices - theyre the only real winner with massive amounts of stamp duty being collected, and huge amounts in IHT. Owners only benefit if they want to borrow against the house - if they want to trade-up they need to find more remember.

The sad thing with high prices is that decent couples who should be having kid's cant afford to buy, so are renting somewhere whilst working hard to save a deposit, yet on-benefit chav's and immigrants are encouraged to have MORE kid's because the council will provide them with better housing and benefits if they do!!!! Totally wrong situation, and cant be good in the long-term can it?

Tiggs

Pre Owned Asset Tax came in the finace Act 2004....and despite the crap in the papers about "middle england under attack" has has a limited effect on most IHT planning.

i have done more business since the new changes than the two years prior! still lots of options.

T (IHT bod)