I'm my early 20s and in the UK. I earn more than my Dad who is in his 50s. He managed to get a house, have money left over for an expensive hobby, decent car, the odd holiday etc.
I'm a 90th percentile earner. Will 95+ percentile earner in a few years time. Yet it feels like I am not as well off as I should be. I don't live in an expensive area either. Yet I need to save so much money to even have the opportunity to buy a house. Then I also need to save a tonne of money for a nice retirement as government pensions get absolutely gutted.
I'm not going to pretend I won't have a good amount of disposable income even after maxing my pension contributions and paying a mortgage. But it just annoys me that I'm a relatively high earner and yet the money won't go very far. The most expensive thing I'll ever buy would be a brick box, and one that's not even as good as my parents.
I’ve thought about this a lot. My parents had 2 TVs in a house of five(and one was junk). We had stick on vinyl floors, and a cheap white appliances. Counter tops were linoleum, and we had 1.5 baths. I cut the lawn, and we went shopping in stores. We took two vacations requiring planes for the first 13 years of my life. Most vacations were camping. We rarely went out to eat. We didn’t have computers. We had 1 corded phone in the house.
This is in stark contrast to my house. We have two iPhones and get new ones every 2-3 years. We have two iPads, 3 computers, and gadgets galore in a house of 4. My countertops are stone, my appliances are stainless. We go on vacations yearly that require planes and hotel, and used to eat out often. I have a house cleaner, and pay for an expensive gym.
I realize I may not have the house my parents have, but I have nicer things. I make more money but I spend it very differently then they did. There was basically nothing we bought that compares to an iPhone every 2-3 years. I know so many people who travel regularly, and don’t seem to realize this was rare 15 years ago. I really feel we spend our money differently.
I mean it sounds to me like you're just wealthier than your parents were, but housing has risen in price disproportionately and so the things you buy are different. Would you really be purchasing a house if you didn't buy a phone every 2 years? The things you list sound like, idk, $10k/year with some heavy assumptions mostly weighted on the vacations than the tech. It's likely true there's more premium goods at (higher) affordable prices, but that doesn't actually contradict the narrative that housing has gotten a lot more expensive.
I say this as someone in the same boat, who could/would/will casually afford to buy an expensive home under 30.
The median net worth of millenial families (35 and under) is $10k. Probably trends negative if you filter down to people below age 30 only.
My takeaway from his or her comment was that housing is expensive because it’s nicer.
And it’s true. It is hard, if not impossible, to find a modest, small house. The median size of new construction is more than double what it used to be. And houses are full of glitzy appliances, fixtures, moldings, and counters. It really does just heavily inflate the price.
How much would a 1,000 square foot house with modest fixtures cost in your neighborhood, if it existed? That’s what the typical house used to be.
> It is hard, if not impossible, to find a modest, small house.
True, but small condos have seen similar appreciation
> houses are full of glitzy appliances, fixtures, moldings, and counters. It really does just heavily inflate the price.
This do increase the price of real estate, but not that much relative to the bigger picture. The price of a "glitzy" fridge vs. a non glitzy fridge is going to be what, $500? $1,000? Likewise, appreciation has occurred on older properties without these features unless you're below the inflection point where the risk of the property declining in value faster than the market appreciates is so high that the price remains poor.
A sizable percentage of people don't want to live in condos. And they aren't necessarily small, either.
>This do increase the price of real estate, but not that much relative to the bigger picture. The price of a "glitzy" fridge vs. a non glitzy fridge is going to be what, $500? $1,000?
That's an extreme understatement. A glitzy refrigerator might only had $500 but marble counters might add $20,000 or more. Same with flooring. The price difference on a house full of stick on vinyl and real hard wood might be an additional $20,000. Then you get to other cosmetics such as crown moldings, jacuzzi tubs, walk in showers, vaulted ceilings, heated towel racks, and more. You could take the exact same house structure, and through flooring, counters, and cosmetics alone you could easily jack the cost up by $60,000.
>Likewise, appreciation has occurred on older properties without these features
Not really. Houses get upgraded with better floorings, better counters, additions, and other renovations. Go find a house in your neighborhood built in the 1950s with no major additions, laminate counters, and cheap flooring. Good luck.
> A sizable percentage of people don't want to live in condos. And they aren't necessarily small, either.
Most condos are small. If a sizeable proportion of people don't want to live in condos, that would make them cheaper. The fact that they're appreciating similarly that is further evidence that the premium for size is not the driver of what's happening.
> That's an extreme understatement. A glitzy refrigerator might only had $500 but marble counters might add $20,000 or more. Same with flooring. The price difference on a house full of stick on vinyl and real hard wood might be an additional $20,000. Then you get to other cosmetics such as crown moldings, jacuzzi tubs, walk in showers, vaulted ceilings, heated towel racks, and more.
Most properties don't have jacuzzi tubs or vaulted ceilings. You're not wrong, but they're not relevant to the discussion of what's happening to the median home buyer.
It's nonsensical to think that the price of housing has risen primarily because of quality increases because many, many houses have seen large appreciation with no changes.
> It's nonsensical to think that the price of housing has risen primarily because of quality increases because many, many houses have seen large appreciation with no changes.
So it should be absolutely no problem for you to take me up on my offer. Locate a home, built in the 50s or 60s, without any additions adding square feet. Cheap counters, cheap flooring, and cheap fixtures. If what you say is true this should be relatively simple.
How much is it, and how much more or less expensive is it than newer construction in the area. If homes are just rapidly appreciating while they sit there unimproved, this should be a trivial exercise.
My parents bought a 1400 sqft, 1950s-built home in 1993 for $350k. It still has all old appliances such as a 1950s oven that looks like this [1], old gas heating vents, no central cooling, no pool. No additions. The fixtures and flooring aren't cheap, but they're not luxurious, and are over 60/70 years old at this point - only real maintenance they've done is re-shingling the roof and repaving the driveway every decade or so.
The house is now worth $2.1M (+500% gain). Obviously if they sold a new buyer would tear the whole thing down and build some huge modern home on the land (which is the actual valuable portion of the asset) as has been happening in their neighborhood.
You are placing way too much importance on the relatively small value of fixtures and "nice" amenities vs. the global glut of capital chasing appreciating assets (made much easier through online platforms) such as land in desirable areas.
I think that people ignore the fact that the population of the United States has dramatically increased over time. We now have 331 million people whereas there were only 210 million in 1970. So of course housing is going to be more expensive. The issue gets even more dramatic prior to 1900.
The USA has half of a continent to house all these hundreds of millions. The problem is with overcrowding in larger cities, not the lack of space (even if the location is suboptimal).
NOne of us should feel compelled to crowd into large cities anymore. NOT in the 21st century, and CERTAINLY not after we've clearly demonstrated as a workforce that we can very easily get our jobs done remotely. Sure, that's not for all workers, or even most, but a huge proportion of us could very easily move to small towns all across america to relieve the crowding pressure in cities or the most trendy suburbs.
IF and ONLY IF: employers join us in the 21st century, and embrace remote work where they can.
(and the real danger, as I learned in the 1990's, is not even being remote - it's being "not at the home office" of a distributed organization - it is a career killer, and when that "business cycle" inevitably hits, your remote-office workers are always the first to get cut. This shit has to stop if we're going to get out of this "crowded into cities" nightmare).
We spend it differently because supply and demand (yeah, duh), but what I mean is that we make about the same as our parents, but the cost of housing went up, while the cost of travel and electronics went down. So we buy cheap stuff while try to figure out what to do with housing (and healthcare, and so on).
Everything that requires local labor is very expensive (partly because our expectations and requirements increased, we are willing and able to spend more, so a very high equilibrium point formed), everything that can be mass produced is cheap. (And not just because externalities are hidden, but because technological progress.)
Seems like the ol' "poor people aren't really poor because they almost all have refrigerators and not even kings had refrigerators two hundred years ago!" argument.
I call the counterargument "You can't live on pepper". As in even though pepper is way cheaper than it was 500 years ago, you'll starve if that is all you can afford.
With tens of millions of Americans facing food insecurity and tens of millions of Americans facing eviction now, thanks to years of precarity exacerbated by the COVID-19, I think the situation is worse than you're suggesting.
The counter to your strawman is that you are poor if you feel poor.
Since we have proven that a majority of people feel poor (i.e. they need to earn 20% more), and that this is true even of millionaire’s, we need a different definition of poor, because something isn’t right here...
> The average income is just $18,046 (£13,850) a year, and almost a third of the population live below the official US poverty line. The most elementary waste disposal infrastructure is often non-existent.
> Some 73% of residents included in the Baylor survey reported that they had been exposed to raw sewage washing back into their homes as a result of faulty septic tanks or waste pipes becoming overwhelmed in torrential rains.
I’m not sure how cheap that is overall. For example an extra $400 a month is $100k in mortgage loan right now. It all adds up, and is easier to do if you avoid the wasteful spending.
This is an excellent point - I think we are definitely a generation of consumers, and what happens is, kids who aren't taught how debt works get caught up in it.
And once you're caught up in debt that extra 400 doesn't go to a mortgage it goes to that credit card or that high car payment on a 72 month term..
I’m in my mid fifties and I have never had a company pension, defined benefit or contribution. I saw my first house decline in value by 25%. We had interest rates peaking at 15%. I didn’t have student loans but only because I didn’t go to university, just like 90% of my peer group. Unemployment was much higher than it is now and schools were teaching subjects for obsolete careers.
I think you're missing how pervasive & broad the issues are these days.
You mentioned you had a house. I'm fast approach the top 1-2% by income and think I can maybe swing a 1 bed apartment. It'll be borderline. Not house...apartment.
...no idea what the other 98% of my peers are doing but they sure as hell aren't buying houses. Meanwhile all the landlords I've rented from thus far where a generation older and had entire portfolios of properties.
Pretty sure I'll come out on top of this because I'm doing well, but can certainly understand the disillusionment of the younger generation
There's a reason Pittsburgh's population declined by the hundreds of thousands since the 1970s. Sure you can get a cheaper house. But you aren't making coastal money.
In the 60s those "small towns" had manufacturing plants you could just walk in and get a job at, many of which were union and paid extraordinarily well.
These mid range cities are not as agreeable as you think. I live in one. Housing is very expensive W.R.T income now.
The reason many of these places have cheap housing is largely because of abandoned neighborhoods, vacant lots, condemned housing, ancient housing which requires A TON of work...the neighborhoods people want to live in are pretty expensive still.
Not to mention the old school mentality and opportunity cost. I left one of those old school firms. It was 8-5 everyday, no variation, no flex hours. No vacation in your first year. No comp time for travel. Expectation of working additional hours. Poor yearly raises, etc. Small job market = small network = less salary jumps.
So it sounds like tradeoffs. Go to a big city, get a high salary, can't afford a house. Go to a medium size city, get a lower salary, can afford a house.
I'm not surprised there is a utopian city where salaries are high and housing is cheap.
That's why people left Pittsburgh en masse and other cities have larger populations. Ultimately if it didn't make sense to go to big cities people would stop because of the costs - clearly the market says it's worth it.
Not everyone wants to live in the midwest with terrible food options just so they can afford a house built in 1940 with knob and tube wiring. These costs are never considered because people just want to say things like "lol move" without considering why people just don't move.
Yea if you want to live in a crap, run down neighborhood with a crappy school district and a house built a century ago that isn't code and will cost 50k to fix. I lived there - these statistics are nonsense. They don't tell the whole story.
I don't think I've ever seen someone so confidently attempt to refute data via personal anecdote, so bravo for that.
The median home is not always "crap, run down with a crappy school district". Yes, there exists a quality distribution, and the bottom quintile often has the worst quality, but that's true in every State and every Country.
These are perfectly good homes in perfectly good school districts.
Again, single data points only get you so far in an argument — but most importantly, the aggregate data corroborates it. Nobody claims that outliers don't exist, but we're talking about medians here.
I honestly can't help it but laugh. LATROBE. Latrobe is an hour away from Pittsburgh. Population? 7,885 (2018). There is nothing near Latrobe but St Vincent College. There are very few jobs. Oh and the commute? You take 376 E through the Squirrel Hill Tunnels. Easily a 2 hour commute. Sounds fantastic! Great pick!
Hampton is in Allison park which is a nice suburb. The median home price there is 295k. The house you selected is pretty small, 2 br, 1 bath, which makes a ton of sense - not a lot of young people looking for good jobs are going to want to live in a suburb with older people and families.
> Again, single data points only get you so far in an argument — but most importantly, the aggregate data corroborates it. Nobody claims that outliers don't exist, but we're talking about medians here.
But you cherry picked a value WELL BELOW THE MEDIAN IN HAMPTON. The median is 295k and rising fast. So tell me again, what cheap housing are you talking about?
Oh btw, unless you're lucky and at a FAANG (which have fewer jobs here) you ain't making anywhere near 6.
Go ahead, move to Braddock for that 50k house and breathe in the wonderful air from Clairton Coke Works and Edgar Thompson. I doubt you'd read that on zillow.
Again, I’m just playing by your rules — look up the top 10 school districts in the Pittsburgh metro area, and look up housing on Zillow and Redfin, it’s really not hard to find decent housing under $250,000.
> Not a lot of young people looking for good jobs are going to want to live in a suburb with older people and families
You’re moving the goalposts. You started off talking about school districts — not a lot of young people care about that. If you want affordable housing outside of nice school districts, and not in the suburbs, you’ll find plenty of that in the Pittsburgh city center, also.
The fundamental argument is that if you earn the median income, and you need to live in a good school district, it is more than easy to own a home and build equity in property — you just have to sacrifice being able to live near dim sum and access to “Hamilton”. If you don’t care about school districts, you can find a place with a short commute from work. You might even be able to get some dim-sum action. Trade-offs!
> Pretty small, 2br, 1 bath
Are young people looking for 4BR’s? I seriously think you misunderstand what the “median home” means — it’s not a McMansion. Also 2BR is large enough for a couple with one child.
> Go ahead, move to Braddock for that 50k house
Yeah but...you don’t have to do that. You can move to a far nicer neighborhood in the Pittsburgh area for $150k. It all depends on which trade-offs you’re willing to make given your personal circumstances. $50k is many standard deviations below the median, we’re not talking about that. You don’t have to be a FAANG engineer to earn the median income, especially at the household level.
> But you cherry picked a value WELL BELOW THE MEDIAN IN HAMPTON
No, I showed you the aggregate median home value in the greater Pittsburgh metropolitan area on 3 different sources now, and then made a cursory sweep of the current state of the housing market to corroborate the aggregate metrics. It was pretty easy to do. The data doesn’t lie. That’s far more than you’ve done in this discussion: un-verified personal anecdotes devoid of any citation or sources. It’s honestly pretty remarkable.
That solves my property too expensive problem how?
More seriously...not super keen on living in the US to be honest. Could probably do it practically, but given my life circumstances it would be a net loss.
The income:price ratio would be better if you only consider NYC/SF prices. If you also take in account the vastly lower prices in other regions, suddenly the ratio would become a lot more favorable in those other regions.
Not who you asked but because people have lives built where they are living and they don't necessarily want to move to an entirely different continent away from their favourite people and places even if they could be making more money?
Like if you want to do that power to you, but this seems like such an insane question to just ask a stranger on the internet given that there are very obvious reasons why a person might not want to do that
Everyone will argue with their own statistics, but I think your general sentiment is correct.
Everyone seems to think the oldies had it easy in the good ol' days and the youngens are a bunch of lazy good-for-nothins.
There are probably certain a ways it has gotten easier and others in which it is worse... But I think this is more about generational sentiment than actual facts.
thats not really true though, we have the numbers. In real terms, education, healthcare, and housing costs have grown at a much higher rate than inflation. It is more expensive to go to college, pay rent, and stay healthy now than it was 30/40/50 years ago.
Housing seems to be the primary issue, but you’ll find very little support for actually fixing the issue - more and taller buildings in densely populated areas.
I don’t think people have a problem with spending more on education, they just want a reasonable return on investment for it. Turns out pumping money into monopolistic schools doesn’t get you a better result
The boomer generation was more or less promised that housing was the key to social mobility. And it was for a large number of people. It's hard for that to remain true now, and there's a ton of negative externalities. It's not like these people were experts on real estate policy before, they just don't have perspective on how it differs for the young.
"Not liking change" is disingenuous, even if, broadly speaking, older people don't actually like change
RE: "unemployment was much higher than it is now" - I'm not sure what country you're in, but here is a graph of the US unemployment rate since 1950: https://fred.stlouisfed.org/series/UNRATE (unemployment was higher this year than any other period on the chart)
Regardless, the U. S. had super-high interest rates at that time, too. 12% sticks in my head, but it was also the time of the Variable Interest Rate loan, where I watched co-workers really have to tighten those budgets and almost lose the house because interest rates went from "ungodly high" to "ridiculously high".
I think it’s good that you were able to own a house even though it lost in value. This ownership still sounds better to me than only being able to rent an apartment. Renting always means that the payments lead to 0% ownership in the end, hence a 100% decline in value.
This rarely matters unless you are looking to sell or borrow against.
> We had interest rates peaking at 15%.
But inflation was higher at the time. Also rates are 0% now at the Fed level, but if you are a consumer you are going to pay a bit depending on your credit score.
> I didn’t have student loans but only because I didn’t go to university, just like 90% of my peer group.
The governments (it's really a global phenomena) pushed the general public into universities. It's hard to blame the students when you take that decision at a very early age 17-19 and most of these youth doesn't have any life experience.
> Unemployment was much higher than it is now
I highly suspect the current unemployment rate is meaningful. To be counted as jobless, you need to register with the local employment office. It's possible today's youth no longer rely on that and use modern alternatives instead.
> schools were teaching subjects for obsolete careers
They still are.
> It wasn’t as rosey as it is often portrayed.
It was not. The only difference really is land and housing which was significantly more affordable and did matter less where you lived. Now you need to live next to a "jobs-hub" that have insanely high rent and purchase prices.
If you buy a house worth 4x your salary (in the ballpark of average), a 25% decline in home value means you need to spend an entire year of labor just to break even, ignoring the obvious associated living costs. The decline doesn't matter if it's temporary, but they're not always temporary.
Monetary policy is a huge factor in all this, asset holders are greatly advantaged over productive members of society at the moment.
The combination of artificially low interest rates with significant inflation in particular make housing spectacularly unaffordable. This combination simultaneously pushes up the costs of housing due to asset bubbles forming while reducing the ability of people who earn money to save for a down payment on a house.
I'm no millennial, but gen-X. My brick box is okay. Not as big as the one my parents had, but it's in a bigger city, which really adds to the cost.
But my wife and I are double earners, unlike my parents. And we both have really good jobs. We don't have it hard, but we don't drive new cars either; we've got a second hand Prius. The only sign that we've got it good is that our house in Amsterdam is not as tiny as most.
But I also wonder if maybe our expectations may be too high due to the constant stream of luxury lifestyles that we're being fed on TV, in movies and on other media.
I'm "X" as well and while I grew up it never occurred to me that owning a single tiny home would one day be considered a luxury. I was raised by a single dad who, on one tiny teacher salary ended up with two houses, all sorts of motorized "toys", financial security and a pension by the time he retired.
I probably make 3-4X what he did at the top of his career, and am kind-of hanging on to a house with a tough mortgage and a no-frills lifestyle. My Millennial and younger colleagues' financial lives are even more of a disaster.
I remember when someone reported that GenX was the first generation for a long time whose finances were expected to be on average worse than the previous generation. It looks like this trend has continued at least 2 or 3 more generations. It's not a blip, it's the new actual trajectory.
With middle class incomes stagnated since about 1980, it's no surprise everybody feels a lot poorer now. They have a quarter of the effective income people in a similar position had in 1980.
I think both pay has gone up over time and tracked with inflation. I also think the things people are buying better and more expensive products than they did before.
expectations may be too high due to the constant stream of luxury lifestyles that we're being fed on TV
A vague quote comes to mind, something about the peasant classes of a few hundred years ago would have overthrown the ruling classes a lot sooner if they had any idea the luxuries the ruling classes were enjoying.
I.E., maybe what's happening is thanks to TV maybe we're finally understanding how good some of those on the top have it.
You live in Amsterdam... sorry to say, but that is privileged as hell. Housing prices are becoming insane even outside the Randstad (I’m a 95 percentile earner too) so if you own property in the Randstad and think ‘the only sign you have it good your house is not tiny’ - take off the horse blinders.
Like I said, that is the big difference, but it's also the only difference. And the fact that living in Amsterdam is so privileged is also not a good sign. It's not good if cities become ghettos for the rich.
And with Brexit, there's likely to be an influx of bankers driving house prices even further out of the reach of most people. Good for me I guess (at least if we ever decide to leave the city and sell; otherwise it just increases taxes), but I don't think that's good for the city.
Comparing a salary with a pension to a salary without a pension is insanity. Wages are not stagnant. They've declined precipitously. take-home pay is stagnant and pensions are dead.
And real-estate has been pumped so heavily with low interest rates that you either can't afford it or, if you can, you get to sleep with the knowledge that the music has a good chance of stopping on your watch.
Just for the record, I think "pension" in the UK means something quite different than it does in the US. A UK pension is (usually?) more like a US 401(k).
In the UK, they refer to defined contribution and defined benefit as pension.
In the US, pension is short for “defined benefit” pension, which is an annuity beginning at a specified retirement age. The liability for providing that benefit does not lie with the recipient of the defined benefit, but with the employer (or government).
A defined contribution pension is one where the recipient of the benefit owns and controls the assets that will be used to pay the retirement benefits, hence the recipient is liable for making sure to have sufficient savings and the right investments to be able to pay themselves in retirement.
In the US, social security is the defined benefit pension available to everyone provided by the federal government.
However, it is prudent to expect defined benefit pensions to decrease in value as the retirement ages are increased, and benefit amounts and future value of money are decreased due to slowing economic growth in most developed countries.
Yes, a 401k is one type of DC pension. Specifically, one subject to various stipulations of the tax code section 401(k), where an employer has to setup the plan in such a way that sufficient employees benefit from it in sufficient amounts to pass the non discrimination testing. In exchange, the income contributed is not taxed until it is withdrawn after retirement age.
A Roth 401k is the opposite, where the income contributed is taxed today, but the withdrawals are not taxed after retirement age (unless politicians change their mind in the future...)
An IRA (individual retirement account) is similar to a 401k, except it involves no employer, and the amount of income that can be contributed pre tax is much less, and maybe zero if you earn too much in a year.
The post-WWII generation were able to buy a house plus car/holidays/etc on one person's median working class salary.
It wasn't a particularly palatial house, but the mortgage would have been paid off before retirement.
But this is a direct consequence of a rent-seeking economy which uses property rights as a proxy for political influence. The British economy started being converted from an industrial economy to a patrician rent-seeking speculative economy in the 80s, and the result was massive asset price inflation in property and shares.
This wasn't an accident. It made a certain kind of person extremely rich, and most other people increasingly poor to varying degrees.
Unless there's a change in strategy - unlikely - you can expect the wealth concentration to continue in the UK, with increasing danger to the personal circumstances of any kids you have - if not to yourself if there's a serious downturn.
Even a 95%er is in danger of losing their property if they lose their job for an extended period if they don't live off speculative investments and rent.
>Unless there's a change in strategy - unlikely - you can expect the wealth concentration to continue in the UK, with increasing danger to the personal circumstances of any kids you have - if not to yourself if there's a serious downturn.
It's the same in the US.
>Even a 95%er is in danger of losing their property if they lose their job for an extended period if they don't live off speculative investments and rent.
I fear this the most. My husband and I make more money than the rest of our family combined (both mothers, both fathers, 4 adult siblings, their spouses), but I still feel uneasy about the future. Maybe everyone worries more during uncertain times, but being mid-career with savings/investments I never thought I'd be concerned about losing everything.
I chalk it up to things simply costing more. I make more than my dad did. I dont take any major vacations, go out much, or live in a McMansion, yet we struggle to save.As a kid we took lots of vacations, they saved a good amount of money (stock market was good for them) and are doing well for themselves.
I imagine it's only going to be worse for my kids.
This is the "Avocado Toast" argument that we're poor because we spend $10 on Avocado Toast.
It is totally false. It blames citizens for national structural economic problems like hidden inflation and like bad housing policies discouraging building/planning.
People spend $10 for Nextflix, $90 for Amazon, etc as short term pleasures because they cant spend $GIANT on a mortgage. What are you supposed to do? Might as well treat yourself.
Of course, I'd rather get a home, but if I cant afford it, I wont just sit at home staring at a wall.
It's false for some locations but not for others. I checked on the two homes I lived in growing up and both appreciated slower than inflation from the late 90s to the early 2010s when they were last sold. In real terms they are about 20% cheaper than they were when my parents bought/sold them.
Flyover suburbia is more affordable than it was 20-30 years ago. All major physical items are better and cheaper than they used to be. Netflix is cheaper and better than VCRs + rentals + expensive cable. The big difference is health care and college costs. But most people don't have huge medical bills and college is somewhat of a choice.
The cost of living increase is largely driven by California, NYC, and Seattle. Pretty much every where else things are cheaper than they used to be.
I dont quite agree. I dont think you can compare home to inflation only -- you have to also look at the income in that area as well as total cost. If incomes have also fallen, then the relative cost/income ratio may have remained the same (or as i'm proposing -- has increased.)
As an example, there are depressed areas in flyover states where costs have indeed gone down. But incomes have gone down even more -- they are once thriving places like Binghamton NY which had industries that have since moved overseas.
There is also the cost of healthcare, education, and retirement savings. My father benefited from a pension plan -- I have to save myself in a 401k. My father paid no employee premiums for healthcare, I pay about $900/mo for the family premium (before copays and coinsurance.)
It's not just in declining cities. One of those houses is in the suburbs of Chicago. It's true in basically everyplace outside of the ones I mentioned. You can find a SFH around any major city for 150-300k.
Healthcare is definitely eating up more of the budget. I'm open to the possibility that it's eating up so much more of the budget that it's making buying a house prohibitive, but the numbers I see don't back it up. Most people still have employer provided healthcare and don't pay 900 a month in premiums. Part of that is CoL. Your contribution are higher than my family plan premiums I got through the market place.
this is a variation of the "avocado toast" argument. if you go crazy and subscribe to amazon prime, a music streaming service, and several video streaming services, you're paying somewhere around $100/month. if instead you invested the $100 every month, you could expect to have an extra ~$200k (inflation adjusted) after forty years. that's not nothing, but it doesn't add a whole lot to your safe withdrawal rate in retirement (roughly $8000/year). if you're only able to save a couple hundred bucks every month, that extra $100 makes a big difference. if you're saving $1000+, your subscriptions aren't going to make or break your retirement; you need to dig into those bigger fixed costs to really move the needle.
We might be talking about different budget levels, but to normal people (people who don't have the word 'software' in their job title), 200k in retirement is a lot.
Actually the median 401k balance at retirement is only around 60k, so that alone would quadruple their retirement savings.
>> Actually the median 401k balance at retirement is only around 60k, so that alone would quadruple their retirement savings.
You are comparing apples and oranges. You are comparing today's values at retirement to future values at retirement. It is almost certain that $200k 40yrs from now will not be worth $200k in today's dollars. Inflation accrued over 40yrs -- however low and however faked -- is absolutely going to make that $200k seem not so much.
Presumably, some of the $200k invested will grow, but also, not all the 200k is invested right now, it drips in over 40yrs.
You also forget the wildcard of healthcare lottery. One large medical surgery co-pay and you lose half your nextegg.
I got the $200k figure assuming a 6% rate of return, which is basically the inflation-adjusted rate of return for the S&P 500. both the $200k and $60k are 2020 dollars.
This is the problem. $200k in 2020 dollars wont mean much 40yrs from now. Similarly, $60k sounded like a huge figure in 1980 for retirees planning for 2020. For a proper comparison, you'd need to compare purchasing power of $60k to a retiree today vs $200k to a retiree in 2060 -- i'll bet it is about the same!!!
Inflation is a huge unknown here. My parents' home in 1981 was $35,000. The same exact house today is over $1,000,000. Rent used to be $150 to $200/mo. The same rent today is over $3500.
I did a monthly $100 contribution at 6% assuming tax free comounding for 40yrs and came up with your figure of $200k. That is right -- you'll have $200k at this rate. But in the year 2060 that might be just a year of rent and you're broke!
I hope this doesn't come off as condescending, but I think you are missing the distinction between real and nominal value. if I just say "$200k" without qualification, that is a nominal value. if I associate that nominal value with an instant in time (a whole year can be a narrow enough window when inflation is reasonably low), it becomes a real value. when I say you would have $200k in 2020 dollars in forty years, inflation is already taken into account. if a dollar is worth half as much in 2060, I'm saying you would have $400k in 2060.
you are right that inflation is a huge unknown. if inflation goes up massively without a corresponding increase in nominal returns (unlikely, but possible), it would make that 6% figure incorrect. in this case, you would have less than $200k 2020 dollars in 2060, but the real value of a 2020 dollar would not have changed.
as a concrete example, suppose I own a three shares of microsoft stock and you have a brand new ipad air. both are worth about $600 today. if I offered to trade you my microsoft stock for the air, you might be happy to do so if you don't have any use for the ipad. if the fed prints trillions of dollars overnight causing the value to collapse, it doesn't change the fact that my three MSFT shares have roughly the same real value as the ipad. "2020 dollars" is just a slightly more abstract way of describing this dynamic.
Fair, but i'd say the 6% assumption is suspiciously high in that case. I think you might be doing something like ({mean SPY return} - CPI)
Except that CPI is a deviously misleading number. I wonder if the same approach applied in 1980 would come close to aligning with 2020 numbers (including healthcare, college, rent, energy, etc.)
Please be brutal in your response, I want to understand if my understanding of this is all wrong!
keep in mind, this is really just a back-of-the-napkin calculation. I'm certainly not an expert on the matter, but AFAIK 6-7% is generally accepted as the real rate of return on the S&P 500 (at least historically and over long periods of time). inflation calculations are always kind of messy thing though. in reality, some goods/services increase in price much faster than others, and CPI will be very sensitive to what goods/services you choose for your basket. even when you take into account overall inflation, college tuition is vastly more expensive than it was a few decades ago. it also gets tricky when you consider that the quality of goods can increase over time. a mainstream CPU costs about the same as it did in 2000, but is way more powerful. is that deflation, or is technological advancement a separate thing? I never got far enough in economics to know the answer.
yeah, I'm assuming most of the people on this forum have upper-middle salaries or will likely have them in the future. I mostly wrote the post with this audience in mind, though I think the bit about analyzing spending in relation to your savings rate is relevant to everyone. I am very fortunate to have the opposite "problem": I tend to be very stingy and waste a lot of time and energy trying to save amounts of money that just aren't very meaningful compared with my savings trend. unless you're unable to save anything at all, I think it is very important to strike a balance between saving for retirement and spending on stuff you enjoy in the moment.
also minor addendum: someone with the median 401k savings might receive something close to the median social security payout of ~$15,500/year. since this is a guaranteed payment until end of life, this is like having >$375k in a retirement account at age 67. $200k is a meaningful amount to add to a $60k retirement account + social security payments, but it doesn't do anything close to quadrupling the person's safe spending capability. it's more like a 45% increase, which is still nothing to shake a stick at!
> since this is a guaranteed payment until end of life, this is like having >$375k in a retirement account at age 67.
I would not bet on social security retirement age staying at 67, nor would I bet on the purchasing power of $15.5k remaining anywhere close to it is today.
sure, don't lose track of the thread though. I'm comparing against someone who is currently retiring with $60k in their retirement account. $60k probably won't be the median 401k value in forty years. all this stuff is subject to change.
I'm not sure how one would survive on 60k for even 10 years. This isn't an "investable" amount and it's not enough for food, yet along housing expenses.
Clearly nobody is in that situation. If you have any money at all in 401k, you almost surely have paid significant amount into Social Security, which pays out retirement benefits independently of whatever you might or might not have in 401k account.
This all depends on what you assume for spending. Speaking from experience, it is pretty easy for an "entertainment" budget to hit $1000 per month, or a $2MM inflation adjusted savings.
4x nice restaurant or dates = $200
1x Weekend trip = $250
Hobby projects = $100
Drinks with friends = $100
Media Subscriptions =$50
Most of the people I know who are struggling are stuggling because rent and utilities takes the vast majority of their post-tax income. There's a few people I know who are just terrible with their finances (people who no doubt would have had problems at every previous time in history), but now seems a bit structurally different to some of the boom times due to the number of people I know who have hardship due to expenses they can't easily drop.
But the thing is, nobody said you have to pay for Netflix or Amazon. Each person is responsible for making good choices with his or her money. Lack of financial discipline is not society's fault.
Yes, managing finances takes some level of skill when there are many different expenses in a modern personal budget. But there are ways to live frugally and get ahead. They just aren't flashy or fun.
On two very small incomes my wife and I made big financial strides early in our marriage. We were very frugal but we made it work. We had the lowest tier Internet. We had a very conservative budget for eating out and groceries. We didn't have Netflix or Amazon. Once we paid off a number of debts, our spending was able to increase responsibly.
Correct. It was from being very frugal in _all_ areas of the budget. Eating out, entertainment, internet, not taking vacations that wouldn't be financially responsible. Frugal dates, frugal Christmas/holiday celebrations, living in an extremely inexpensive apartment in a not-wonderful area of town. We were pretty late adopters of smart phones because we had cheap flip phones. We gave to charity too.
It's all about priorities, and having a vision for being financially "free". The victim mentality is an _enemy_ of human creativity.
You can say, "this area is too expensive; we need to find a way to move somewhere else". You can say, "I need to sell this gas guzzler and get a cheap, used commuter car." These things aren't _fun_. But they set you up for success.
The crucial data point is missing: "two very small incomes".
US minimum wage is $7.25 per hour. 2 people working full-time at minimum wage would bring in a household income of $30k per year. But you couldn't possibly pay off $60k in debt and buy a house with that. So your household income had to be much, much higher.
presumably GP and their wife did not go on to both earn minimum wage after getting their degree(s?). even today when a bachelor's degree is worth less than it once was, the median wage for college graduates at their first job is around $48k. only about 2% of people with any amount of college education actually make minimum wage. it's pretty rough living on minimum wage, but paying off student debt is very rarely a contributing factor.
You're right. It was about [REDACTED FOR PRIVACY - but much much less than parent's 48k medium income per person for college grads] before taxes, both with college degrees.
I'm sorry lapcatsoftware if it sounded like I was making light of poverty. Poverty is terrible. But at least in the US, there is _so much_ opportunity to not be stuck on a minimum wage salary. Resigning to the idea that, "Well, I guess I just have to work for minimum wage" is not going to help and it doesn't have to be true. It's sad to think that people give up mentally when there's so much they can do to help themselves.
What opportunities? Tell me how an average cashier can land an average 150k/year job in a metro area? Don't forget that the said cashier has mediocre intelligence, so-so appearance, zero charisma and little talking skills. He might swap grocery store for an oil change shop, but that's about it. Our society is mostly stratified now, with a little upward mobility left for high-tech workers.
That person STILL deserves a modicum of dignity and stability. Most people in this category don't really care if they move up any ladder - they just want to exist and not be facing constant economic crisis and near-homelessness.
How are you ever going to be financially free from eating out less often? A meal at a restaurant costs what, $100? That's $5K a year. No holiday, another $5K maybe? Cheaper phone, ok, you don't buy the newest iPhone, so maybe you save most of a grand in relation to iPhone couples.
Even the car cost is not as big as the sticker price, because it has residual value. Granted it may be a big figure, but it is also spread over several years.
Seems to me you're literally one raise ($10K or so, and there's two of you?) away from making up such deficits, and you want to be near opportunity for that to happen.
Investing $10k a year at 6% (average stock market returns are 6-8%) gives you $368k after 20 years (net increase of $297k over inflation at 2%). Even if you just saved it for ten years that's $100k. Neither are enough to retire on, but it gives you a lot more options. Even if housing increases faster than the stock market, that $10k is $800/month which could be going towards a mortgage (in addition to the rent they are already paying).
Outside of the obvious "don't buy a gas guzzler" tropes, most of the best ways to save money will end up costing you time. Whether it's living with a longer commute or working more hours, there is a point at which people are just happier living their lives than wasting years in their prime scrounging and being miserable to afford a downpayment on a house in worse condition than what they could afford to rent. Big budget decisions like vacations and cars will obviously factor into this in a big way, but nobody's financial situation is changing massively over a Netflix subscription.
Following your own logic, it's almost like saying how dare you say you had _any_ budget for eating out? Why not just save even more money?
I think part of the disconnect is that many people today assume that life will be, or should be, pain free. Life is hard. It's always been hard. It's hard today.
I think the reason we want to believe otherwise is because of the tremendous wealth we have experienced recently, so we expect that trend to continue indefinitely.
To me, it is the lack of gratitude for what we do have and can afford that galls me.
The generation immediately after WWII gave a glimpse of what was possible, before crafty people figured out how to siphon off the majority of that wealth to those already at the top. And over time, that siphon has grown stronger.
Life should not be as hard as it is. It is hard, and it is not painless, but it's harder and more painful than it must be. We have billionaires siphoning money from the masses (either directly, or indirectly via government action) that are already struggling. Redistributing even half of their net worth would be a life-changing amount for the average person, and could put wind in the sails of many charitable/educational/scientific/medical causes.
There is no reason why the current situation should be allowed to continue, and many reasons why it should not. Obviously it's a hard practical problem to crack (given that a naive approach to redistribution of this kind would be met with a great pushback and implode various systems that we depend on), but unless we do something effective, we'll keep ruining the planet while trampling the poor at the same time.
Your house has smoke detectors and a dishwasher. Your car has airbags. When you decide you want to build a garden shed behind that brick box you need to get permission from the town and pay for that permission. Your dad didn't have any of that stuff. You more or less need a smartphone to function in modern society. There's more wealth sloshing around and more (in terms of quantity, probably not proportion) of it comes your way but you're not getting any freedom to do the things you want to do from that wealth because society takes a huge chunk of it and earmarks it for things and you don't get to use it to take a vacation or whatever. Basically standards of living have inflated and there's no choice not to buy in.
Also the interest rates vs asset prices thing other commenters have mentioned isn't helping.
I see this argument, but it has limits. A seasonal farmworker today has access to Google and Wikipedia, but they are still working 12 hour days. They are less likely to get communicable diseases due to vaccination and disease eradication, but hospital stays are more prohibitively expensive than before. It's complex.
I feel the same. I'm not earning quite as much you are, but still doing better than most of my peers. None of the millennial spending tropes apply to me, either, since I don't buy anything outside of the usual bag of groceries once a week.
What's especially worrying is that if I'm "doing well", and I'm so screwed, what's going to happen to the rest of the population below me?
As an engineer in his 50's (USA) - I am also a 90th percentile earner, but I absolutely agree, I'm nowhere near as well off as my parents were at my age.
I never had the money to take my kids on nice vacations every year like my parents did. Also never had the money to justify buying a new car. And while I do have a home, I have no hope of paying it off before retirement. (which, as an engineer, in the USA, could be 1-5 years from now, involuntarily - my father worked for the same company his whole life, while I've had to change jobs 6 times, due to either corporate buyouts or layoffs. NEVER had a bad performance review).
All of my kids, my brother and sister's kids (all in their 20's now), are all very much struggling, barely making it (and in a couple of cases, NOT making it). Only ONE of them (my son) got through college and found a reasonably decent job, and even HE is so bogged down with student loans, he may never own a home.
So as a picture of 3 generations, there's a very clear trend.
For reference, 95% percentile would be somewhere around £100k a year in London. (If you look at working men aged 25-55 the number should be a fair bit higher)
I don't know what you earn but if you are early 20s it might be less than that. There is a lot of money floating in London, the price of homes almost make sense when you realize what the top earners actually earn, the few percents competing for the same homes.
The other critical factor is instability in the sense that we can lose our jobs at any time. It makes it very difficult to plan long term if you expect your industry to get offshored, or automated, or generally collapse somehow. Even if these calamities don't happen to you, you'll still switch jobs way more than the previous generation.
If you are London based, you should also factor in that London real estate’s qualitative transformation in the last 40 years. It used to be real estate, you know, local people buying homes to live in. Now it’s one of the best performing asset classes in the world. You aren’t competing for property with your mates with a big inheritance. You are competing with dodgy oil money that needs to be laundered and more honest international investors told to diversify. The rule of law is a precious and rare component of legal infrastructure, so a lot of money is diversified into jurisdictions with strong guarantees.
I’m generally a pro-market person. In the case of UK real estate, I support a ban on non-residents buying property similar to what Canada have.
You're comparing yourself to the wrong baseline. The opportunities now are different than they were 30 years ago. You also might be comparing yourself to a specific data point (your dad), vs statistically.
> I'm a 90th percentile earner. Will 95+ percentile earner in a few years time. Yet it feels like I am not as well off as I should be.
You should correct your attitude then, don't you think? You are a 90%ile earner. I don't know what "should" implies, but put it in terms of where you "are". You'll be happier.
House prices will never fall significantly. As soon as a house enters the market at anything below the going rate it's bought by a landlord or a rental company. This will keep house prices high forever.
> Why don't landlords own all of Detroit, where housing prices have cratered?
Landlord in the city here - land speculators and landlords own an outsized amount of housing here. Significant churn is caused by blighted house reclaimation by the city, but that's one of the few driving forces allowing residents to have access to housing stock - and by the time it's blighted, there's a good chance it's not livable without significant investment.
Blight is generated because many properties/locations provide such a low rental income low that non-resident purchasers just buy the land as speculation, often doing no maintenance until the house is no longer livable.
While the previous comment isn't as hard of a truth as it implies, large capital owners rather than those who would reside in a home are increasingly the main purchasers of property, at least in Detroit.
The same reason the used car lots don't own all the rust free classics in California, an exceptionally asinine regulatory environment that would put them on the hook for an obscene amount of back taxes.
House prices can fall in real terms even if they don't in nominal terms. I think the is exactly the situation we are likely to see in an environment where the solution to every problem is "stimulus" and "money printer go brrrrrr" in response to the housing market taking a dive.
If the money printer only gives money to asset holders, the inflation will only happen in the asset economy, as opposed to the Main street economy.
This is what we saw with QE in 2008, and what we're seeing now. Asset prices are skyrocketing, while the price of bread is staying more or less stable.
The effects of inflation are somewhat localized at first and the movement of money in the economy matters significantly in terms of the purchasing power of that money for various groups over time.
It's interesting because this looks at inflation from another angle. Some of the central bank money does eventually circulate in the economy but since the money goes to assets first, consumer inflation will always lag behind asset inflation and therefore we have a redistribution effect from the poor to the rich. Unless central banks adopt policies that distribute money evenly among the population they are going to keep distorting the economy.
The central bank cannot distribute money evenly among the population. Congress however can and they basically did albeit selectively based on need with the CARES act which gave citizens direct cash handouts, massive increases to unemployment, and indirectly by funding payroll for small businesses and airlines.
However, they are supposed to maintain a budget and the CARES act alone cost over 2 trillion dollars so they finance deficits by selling US treasury securities. If you look at the outstanding debt, it has grown by about 3.6 trillion dollars worth of outstanding treasury securities from january to august [0]. If you look at the federal reserves asset sheet trends [1], you'll see it grown by up about 3 trillion since january [1] with over 2/3 of that buying those same US treasury securities our government sells to finance the deficit [2].
My point is that if congress had simply decided to pay for all deficits including those direct and indirect payments to citizens this year with printed money and the federal reserve did nothing, we would be basically in the exact same position. Congress is spending to put cash in citizens pockets and the federal reserve is buying up most of the treasury securities that congress is selling to fund that.
The problem is that the fed did not buy those US treasuries.
The fed bought a bunch of crap bonds from the market at above market value (As prior to their involvement, those bonds were tanking), and the people who sold them those bonds then went on to buy treasures and securities.
It socialized the risk, and privatized the profits.
From the current asset sheet in millions of dollars:
Reserve Bank credit: 6,968,229
U.S. Treasury securities: 4,391,505
Mortgage-backed securities: 1,949,547
That puts treasuries and mortgage backed securities as basically their entire balance. Corporate bonds are listed in section 1A as Other securities which Includes non-marketable U.S. Treasury securities, supranationals, corporate bonds, asset-backed securities, and commercial paper at face value and that comes out to a grand total of 86.729 billion or about 1.24% of their asset sheet.
I also don't think this is true... We saw house prices crash 10 years ago, with many owners being convinced that housing, a finite resource, can never go down significantly.
That did certainly happen, but prices were not depressed for any significant amount of time either! Particularly at the timescale of housing transactions. It can take several months to close on a house for example.
Well, I'm only saying that because apparently over 700k people have become unemployed on account of the C.V. That is a significant number of the working population in the UK. This should mean that there would a significant decrease in prices - the bottom would have fallen through the market. I know that the government have pumped huge amounts into the economy which is inflationary. Still, I think house prices will have to drop.
My mental model is that there's too much wealth sloshing around for "large incomes" to make too much difference.
High income is like delta-v, it's great. But you're still near the ground, and you're competing against people already in high orbit.
The beneficiaries of the housing explosion have equity which they can parlay into more ownership, whether for themselves as investments or their children.
Record low interest rates help prices by letting people lever up (letting them spend their lifetime earnings now) to compete but of course also bids up prices, again to the benefit of existing homeowners.
Furthermore, in the UK, Australia and NZ (less familiar with the US or Canada) it seems the government will move heaven and earth to prop up housing.
High immigration rates and supply restriction have not been helping.
I'm not as convinced as GP that the situation can last "forever", but I could see it lasting for another couple of decades. A true housing collapse would probably be a phyrric victory for the young.
You are paying for your Dad's pension, and for the Government services consumed by millions of migrants.
Those same migrants increase labor supply (thus lowering the equilibrium price) and increase demand for land and real estate.
The end result is high taxes and high real estate cost. Of immense benefit to your dad (and other Baby Boomers) who receive risk-free pensions, and supercharged capital gains for their own assets.
High tax rates are what causes this. You are effectively giving away half your wage to sustain a completely unknown person leeching off the government.
What an absolute load of tripe. I'd gladly pay even higher taxes than I do to make sure everyone has access to healthcare and benefits when they need them. "unknown person leeching off the government" is the attitude that just needs to die, it annoys me so much that people still believe this crap, any one of us can be this "unknown person" at some point.
right? and like something i've come to realize over the years is that there is a huge value add of having something just work that i don't think many people actually appreciate. I would absolutely love to pay more in taxes if it meant medicare for all so that if i get hit by a car while riding my bike someone can call 911 and i can go to a hospital and not worry about how much the ambulance costs, whether the doctor i see is "In Network" or not, and not have to figure out how much of whatever needs to be done is covered by the insurance and what the hospital is going to bill me for and whether I can actually afford that or if I need to go into insurmountable debt just to exist.
life already sucks enough as it is, and is entirely too complex in so many aspects that no longer having the "can i afford to not die in an emergency" thought would be such a huge net plus for a huge majority of working americans.
I'd pretty much prefer they'd go against evaders first. two reason: even if it's not as much as what you can tax out of the 99%, it does alleviate middle class pressure.
second reason, middle class can't get savings any more. savings are essential for a wealth of reason, including starting a family, a business, investing in property or other people ideas. these are all essential for growing a solid economy long run.
angel and VC money works as a surrogate but it goes only so far as it aligns with the 1%
incentives; it burns as much as it elevates, maybe even more, and is more of a way to
extract money from growing SMB instead of a way to build a wealthy middle class, as they only play for the exit.
This is blatantly false. Income tax on higher earners in the UK has decreased since the 1970s/1980s when IIRC the highest tax bands were over 70%, if not higher.
Your article doesn't directly talk about the tax rate for the top 1%.
The fact that the percentage of total tax collected attributed to the top 1% has risen from 24% to 30% seems to be more indicative of higher wealth inequality, especially if the figures the other posters have mentioned about lower total tax rates on the rich are true. To me that's a good reason to raise taxes on top earners and lower taxes on the middle class.
When you make most of the money, you pay most of the taxes. You can't squeeze blood from a stone. 10% of a billion dollars is a lot more money than 50% of $100,000.
Have they fallen generally, or has the highest tax band fallen?
Germany had the highest tax rate > 50%, it's now 42/45%. At the same time, the income required to be taxed at that rate hasn't changed with inflation, so while it was e.g. 52.152€ in 2002, it's 57.051€ now - adjusted for inflation, it would have to be closer to 75k€.
Lowering the top marginal tax while not adjusting for inflation so more people get pushed into higher tax brackets from below is great if you're rich, but shit if you're not.
That’s not an argument against taxes, that’s an argument for redistributing where our taxes go. I would suspect that a reduction in the tax rate would mean a less-than-proportional decrease in military spending, anyways, so it’s not clear lowering the tax rate would even help.
Rates and effective rates are too different things.
Some states have zero income tax but the effective tax rate is often similiar because pretty much every interaction with government is self-funded with fees so the effective tax rate is much higher than the on paper tax rate. Conversely you can have a tax rate and then let people deduct everything under the sun getting a lower effective rate. Kind of like how if you income is below the EIC amount (which is definitively not ideal) in the US federal income tax exists on paper (I forget what the rate is) but the effective rate is zero, possibly negative even)
What makes Europe unique such that the proposition that lowered taxes would lead to greater Millenial success holds true, when the same low-tax policies applied in America seem to have yielded similar results to the European approach? If this seems like a leading question, it's not intended to be--I'm American and curious about the potential variables at play here that I'm not aware of.
the European market is a disaster for investment and entrepreneurship, that's what's holding millennial back. your average SMB reach is often regional, and the bureaucracy structure makes almost impossible for garage operations not only to go above national, but to even exist.
like in sports, the size of the talent pool matters, and with an unbearable cost for entry entrepreneurship almost s losing proposition unless if under the heels of some financing partner whims, as it's the only realistic option to sustain the bottom line costs from handling vatmoss, letters of taxations and the other billion historical bureaucratic commitments
No, it isn't. Housing prices as they are are a product of supply and demand. Such that, regulations are preventing the building density required to meet unceasing demand propelled by immigration.
Historically rate of taxes were not much different than they are now, whether for North America or the UK.
Housing prices increasing because of slow zoning and regulations has been debunked already. Typical argument used by property developers.
The reality is that building houses for investment is more profitable for developers so they keep building it. As opposed to affordable housing actually used for living. The result is a glut of luxury investment apartments and lack of affordable nonluxury housing.
No, they just can't build enough. It's not as though building high-rise condos and houses is mutually exclusive.
In Japan, houses don't really appreciate. People just knock them down and build new ones with much more ease. There's certainly no shortage of developers wanting for "investment" apartments, it's not the deciding factor. The demand can actually be met there.
I'm not seeing that luxury investment housing, though. The newly built houses are usually +/- cheap junk at premium prices. At the same prices there's a low supply of 30-40 year old homes, but of a way way better quality. And in any case, new construction + available supply is nowhere near enough to meet the demand. What folks without 500k/year are doing I don't know.
I'm a 90th percentile earner. Will 95+ percentile earner in a few years time. Yet it feels like I am not as well off as I should be. I don't live in an expensive area either. Yet I need to save so much money to even have the opportunity to buy a house. Then I also need to save a tonne of money for a nice retirement as government pensions get absolutely gutted.
I'm not going to pretend I won't have a good amount of disposable income even after maxing my pension contributions and paying a mortgage. But it just annoys me that I'm a relatively high earner and yet the money won't go very far. The most expensive thing I'll ever buy would be a brick box, and one that's not even as good as my parents.