- Jasmine: @brownrach Thank goodness! (22nd May 2013 - 22:30)
- Jasmine: Brings tears to my eyes http://t.co/o0flVR3SEB (22nd May 2013 - 22:28)
- Jasmine: RT @ShelaghFogarty: The woman who asked attackers permission to help victim as they held knives is one very courageous person #woolwich (22nd May 2013 - 21:55)
- Jasmine: @brtoon ...and Callum (22nd May 2013 - 21:49)
- Jasmine: @brtoon Yes! (22nd May 2013 - 21:49)
- Jasmine: RT @theroyaleditor: Muslim Council spokesman sd UK presence in Afghanistan means this barbaric attack "to be expected." No is pure evil. (22nd May 2013 - 21:49)
- Jasmine: Excellent. The 'Absolutely' team back on radio. V funny http://t.co/g708wIGelu (22nd May 2013 - 21:48)
- Jasmine: RT @Moneymagpie: Want to make money right now? Then check our most popular article ever here… http://t.co/dMuUpDTLks #makemoney #savemoney (22nd May 2013 - 17:07)
- Jasmine: RT @Moneymagpie: We've a really special deal to our newsletter list tomorrow so make sure you're signed up (free!) http://t.co/QWdFP27eC7 (22nd May 2013 - 16:57)
- Jasmine: RT @WhichMoney: What tax do you have to pay in retirement? We've explained it all in our handy guide http://t.co/FYp7bkn7Gu <<v useful (22nd May 2013 - 16:35)
- Jasmine: @andrew_rayner @clarerayner That sounds like a very good idea! (22nd May 2013 - 16:30)
- Jasmine: @andrew_rayner Actually, looking for some afternoon tea deals for our newsletter readers. They like them! (22nd May 2013 - 16:16)
- Jasmine: @andrew_rayner Nearly was - am working on it!! (22nd May 2013 - 16:15)
- Jasmine: Save 5% when you spend £30 at The Book People (already v cheap prices) http://t.co/7Gj7CYYgQ0 (22nd May 2013 - 15:51)
- Jasmine: @colinshelbourn True - or night-time intenet-surfing. BIG waste of good sleeping time! (22nd May 2013 - 15:29)
- Jasmine: @colinshelbourn Ha, just got your tweet. I thought the same and put myself straight to bed! (22nd May 2013 - 12:27)
- Jasmine: RT @garwboy: I thought Dan Brown's new book had a tighter narrative but obscene product placement. Turns out I was reading Argos catalogue (21st May 2013 - 23:32)
- Jasmine: @Don03462790 Thanks for the RT! (21st May 2013 - 23:26)
- Jasmine: @FaizAhmedChohan Thanks for the RT! (21st May 2013 - 23:26)
- Jasmine: @NeilMullarkey Thanks for RT! (21st May 2013 - 14:46)
Should the next generation bother to buy a property?
April 2, 2012
There seems to be a given rule that we all have to own some property, and that’s what we “should do”, and invest in good solid bricks and mortar. Surely it is usual for us in Britain, after all “an Englishman’s home is his castle” – although I have never been convinced by that argument in my area of London. If that were true then they are pretty useless castles given the number of burglaries.
“We have a tradition of property ownership in the UK” is another given phrase that is often bandied around. I have had many discussions where sane people will argue that this has been a clear difference between us and “Johnny foreigner”. So just how far does this tradition stretch back? Well in 1914 in fact only 10% of the population owned their own home. Mind you I can only presume that most of them looked like Downton Abbey.
By 1953, the proportion of owner-occupiers in England had risen but was still a mere 32%, although by 1961 under SuperMac and being told that “we had never had it so good” this had grown to 43%. The key figures started to change with the Thatcher governments after 1979, where direct encouragement for home ownership was policy and especially with the right to buy rules for local authority housing. By 1980 the figure had passed the half way mark and we reached 57%. So most households owned their own property – but it was only a small majority.
After this the momentum carried us forward with easier access to funding and by 1991 we were at 67%, finally peaking at just over 70% in 2000 and now falling back to roughly 68%.
Oh yes and to compare us with our neighbours, the French stand at roughly 55%, 42% of Germans owning their homes and the US at 69% (although the recent housing crisis there may well have changed their figures). One country that stands out is Singapore, which stands at 90%, where government savings policy drove people towards owning their own Housing Development Board flat. Truly a nation where the people have a stake in their country.
However, my point is that this move to homeownership in the UK may have been a great boon for many, and especially us lucky “baby boomers” who generally have easier access to financing and had the good fortune (no design here) to have benefitted from a record rise in property prices. The majority of millionaires in the UK now are paper ones based primarily on the value of the one major asset – their home.
The key question therefore is – should the next generation be doing the same? One problem is what are the viable alternatives? If you have a lease then assured tenancies with proper protection only extend for some three years. If we could reform some of the property law here perhaps we could consider longer and even lifetime assured tenancies? Obviously other rules would have to change, such as the enforced right to buy from the landlord, but these are issues to be managed through.
The key issue for the next generation is why should they be spending large sums of money on interest to finance a debt on an asset which may not have the rising value of the previous decades? In fact would individuals be better off paying their “interest money” into a savings scheme (hopefully tax efficiently like an ISA/Pension) for their mature years?
For example if you were to have a mortgage of £500,000, then for a period of 20 years at 5%, the interest paid would be around £292,000. So in effect you would be paying a bank or building society for the pleasure of owning a property in the future which may have not actually gone up significantly in value? Why? Tradition?
It may be far better for individuals to be buying other assets which have value, a yield and an opportunity for growth.
I am not arguing that house ownership is a bad thing, but for many families they are quite likely to spend many years in a form of cash flow penury to service a debt to a bank, in the hope that one day they will be able to tap their plaster wall and pretend it’s a castle.
There is another way.
As for the price of stamps – the rise is obviously a shock, but frankly our Royal Mail has been so abused by politicians over the years that it is hardly surprising that we are seeing such rises. Profits were stripped out as a cash cow and investment was constricted along with any chance of more realistic price rises. Other countries have allowed their mail operations to adjust to markets and become more competitive both domestically and internationally. A good example has been the Dutch Post Office, which has won competitive business in the UK. However, before everyone gets too excited about the rises I have a couple of figures to put them into context – there has been a 25% fall in the amount of mail posted since 2006, and compared to the new price of 60p for first class here, the Italians pay £1.23, and the Germans £1.21 per letter. Ours seems like quite good value compared to them.
And finally….. has Greece got “form”? You could easily argue that Greece’s creditors have essentially let it off the hook by overwhelmingly agreeing to take a 74% loss. So what better time to remember one of the first times Athens got in trouble with paying its debts.
It may not be especially recent news but in 490 BC, the bucolic plains before the town of Marathon were the site of a bloodbath. The invading Persians of King Darius I lost a key battle against the Greeks, who were led by the great Athenian warrior Callimachus.
The trouble is, Callimachus seems to have shared some of the difficulty with numbers that the modern Greek leaders appear to have demonstrated.
Before launching himself upon the Persians, he pledged to sacrifice a young goat to the Gods for every enemy that was killed. Presumably his expectations weren’t very high, and a few goats slaughtered could have been easily managed and resulted in a reasonable party.
However, rather than just one or two, his troops slaughtered some 6,400 invaders. Unfortunately the Athenians didn’t have that many young goats. So they had to reschedule the debt and spread the repayment - and legend has it that it took them a century to honour the pledge. Presumably they lost their triple Baa rating?
Apparently, Zeus and the other Gods had not heard of the Institute of International Finance and were unwilling to take a 74% cut in goats.
Have a good week.
Justin Urquhart Stewart
Seven Investment Management Limited