# Bank of Mum and Dad



## Purple (9 Dec 2021)

I keep reading articles which talk about 'The Bank of Mum and Dad' in the context of people buying their first home. Can we ban that phrase and talk about Intergenerational Wealth instead? 
The Bank of Mum and Dad presupposes that parents have worked hard and been frugal and saved and now can slip a few bob to their feckless children. The reality is that Mum and Dad are probably beneficiaries of two stock market booms, caused by quantitative easing, and two property booms. They may well have inherited wealth themselves from their parents and their parents might have bought their council house for a pittance in the 80's. 

'The Bank of Mum and Dad' is better described as a concentration of wealth in Capital and away from labour, capital that is overwhelmingly owned by older people. We couldn't be doing a better job of constructing a two tier society if we tried. We are treating income as if it was wealth and wealth as if it has no material impact on the lives of those who own it. The only political party which acknowledges this is Labour, which is reasonable since they are the only party which is actually socialist.


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## Leper (9 Dec 2021)

Purple said:


> I keep reading articles which talk about 'The Bank of Mum and Dad' in the context of people buying their first home. Can we ban that phrase and talk about Intergenerational Wealth instead?
> The Bank of Mum and Dad presupposes that parents have worked hard and been frugal and saved and now can slip a few bob to their feckless children. The reality is that Mum and Dad are probably beneficiaries of two stock market booms, caused by quantitative easing, and two property booms. They may well have inherited wealth themselves from their parents and their parents might have bought their council house for a pittance in the 80's.
> 
> 'The Bank of Mum and Dad' is better described as a concentration of wealth in Capital and away from labour, capital that is overwhelmingly owned by older people. We couldn't be doing a better job of constructing a two tier society if we tried. We are treating income as if it was wealth and wealth as if it has no material impact on the lives of those who own it. The only political party which acknowledges this is Labour, which is reasonable since they are the only party which is actually socialist.


My Gawd Purple, it has always been this way. So Mom and Dad were frugal and avoided the bookies, the booze, the wimmin, the men, that house move that would put them up there with the "insecure,"-  can't you just acknowledge their right to spend the money any way they wish? They earned it.


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## Purple (9 Dec 2021)

Leper said:


> My Gawd Purple, it has always been this way. So Mom and Dad were frugal and avoided the bookies, the booze, the wimmin, the men, that house move that would put them up there with the "insecure,"-  can't you just acknowledge their right to spend the money any way they wish? They earned it.


But that is not what's happened. Almost all of the wealth has been accumulated through capital appreciation, not savings from earned income. That's what is fundamentally different in the last 10 years. What you are saying is the myth that is commonly peddled because it makes people feel virtuous; "look at me and how smart and hard working I was! Ooohh, aren't I great!" It's a very seductive spiel and who doesn't like flattery. The problem is it's rubbish and is fundamentally damaging to society.
Until we acknowledge this we'll not solve our housing issues because current Government policy only exacerbates the problem.

And @Leper, I'm one of those people who is on the right side of the problem. I have the capital assets. Why? Because of my age, not my intellect or moral fortitude.


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## odyssey06 (9 Dec 2021)

If you want to talk about the consequences of those booms and quantitative easing on the housing market, the effect of the 'bank of mum and dad' pales into such insignificance in comparison with the effect of 'capital' in other forms, it seems like a sideshow to me. It seems really strange to me to attack the bank of mum and dad and not quantitative easing itself?

There are swings and roundabouts in the property market but also in the labour market... depending on whether you first come into the workforce in a time of growth or recession, or how your chosen career is remunerated by society as your move through it, or even in the natural talents you imherit by birth.

In general, I think the majority of people think it is reasonable that parents can pass on the majority of their wealth to their children, this is also an incentive to marshal that wealth and not do an 'escape to the continent' or whatever.

I'm reminded of this quote, which is Steven Pinker paraphrasing Plato:

_“No society can be simultaneously fair, free, and equal. If it is fair, people who work harder can accumulate more. If it is free, people will give their wealth to their children. But then it cannot be equal, for some people will inherit wealth they did not earn.”_

― Steven Pinker, How the Mind Works


​


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## Purple (9 Dec 2021)

@odyssey06, yes, when I say that it's due to capital appreciation that appreciation is almost entirely due to quantitative easing. A massive increase in money supply can only result in a corresponding increase in capital values. The wealth we generated is a result of monetary policy. If it had been decided not to bail everything out then the people on fixed incomes who owned capital would have faired worst. Houses would be cheap and labour would be worth vastly more relative to capital. 

We should never seek to build a society which is fair in the sense of equality of outcomes. That is fundamentally evil. We should strive for one which offers equality of opportunity. That requires redistributive taxation on both income and wealth.


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## odyssey06 (9 Dec 2021)

@Purple is that what we would have? Or would we just be even more in hock to 'absent landlords'?
Are we talking about the bank of mum and dad in general, or the bailout?
If that's what would have happened with capital, then redistributive taxes and no bailout would to a large extent have 'killed the golden goose', because in your scenario, houses would be cheap... so the wealth you want to redistribute wouldn't be there anymore?

So is the aim to reduce house prices? Or reduce taxes on labour? Because they seem to be in conflict.

The wealth tied up in property (and shares perhaps) is 'static' or notional until it comes to be realised.
By the time it comes to realise sale of the asset, the asset could be worth a fraction of what it has been redistributively taxed on. 
So not sure if I agree with redistributive taxes on wealth in that way.
It is different in kind to labour which does not fluctuate to the same extent.
Although also with labour there is risk of higher taxes creating a disincentive to work.

CGT type Inheritance \ stamp type transactions is different, but that is an unpredictable basis to form a tax base on.
It could be properly used to fund capital projects \ pay down debt.

Specific proposals on re-balancing the tax burden one thing.

I don't see any good outcomes in Ireland from a government going down this route in a major way. Governments have shown they don't have that fiscal discipline and will start using such windfall gains to fund day to day spending to promise more goodies which most voters seem to lap up. So you have a transfer to the unearned and the rent seekers one way or another. One of the goodies might be... an increase in the state pension!
So most people react defensively and want to pass it on to their loved ones.

Equality of opportunity sounds good in theory, but what does it mean in practice? 
Who are you redistributing to? And how does that not create a disincentive to labour and acummulate wealth?

There will be an overlap between what is 'equality of opportunity' and 'equality of outcome', because if you consider children as being those most in need of equality of opportunity, then by necessity that may mean transfers of wealth to their parents. Who have done nothing to 'earn', or be 'frugal' to warrant such transfers themselves. 
You seem to be concerned about a two tier society between those with capital and those without.
There is also a different kind of two tier society, those who labour and those who do not.

I've probably contradicted myself over the course of this, but it is a wide ranging topic.
I think you would have more traction with this on specific proposals... rather than a wholesale 'call to arms' because I (and suspect am not alone) do not trust governments with that kind of enterprise.


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## Purple (9 Dec 2021)

odyssey06 said:


> @Purple is that what we would have? Or would we just be even more in hock to 'absent landlords'?
> Are we talking about the bank of mum and dad in general, or the bailout?
> If that's what would have happened with capital, then redistributive taxes and no bailout would to a large extent have 'killed the golden goose', because in your scenario, houses would be cheap... so the wealth you want to redistribute wouldn't be there anymore?
> 
> ...


The problem isn't wealth per say, it is the distribution of wealth between capital and labour. At present, largely due to money printing, wealth is being concentrate more and more in capital. That makes for a very unequal society and instability and, in my view, is unfair.
The aspiration should be to accumulate wealth through retained earnings from labour. In other words retain earned wealth. We don't do that. We encourage the retention of unearned wealth (inheritance, capital appreciation etc) while taxing the bejeses out of earned income. We conflate income and wealth but we've devalued income by inflating wealth with quantitative easing.

This is a good paper from the World Bank on how to handle debt. It more than touches on this issue and points out how difficult it is to deal with this problem given the structures we have to work with. 
I think there is very little Ireland can do to fix this problem as we are a twig floating in the sea of global capital.


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## Purple (9 Dec 2021)

odyssey06 said:


> Equality of opportunity sounds good in theory, but what does it mean in practice?


Investment in early childhood education. Massive investment. Then taper it down as kids get older but keep it high. More phycologists, more Speech Therapists, more Career Guidance, more SNA's, better teacher training, all that stuff. That's the most important thing. 

If people are no good at parenting (often through no fault of their own) giving them more money won't really help.


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## odyssey06 (9 Dec 2021)

Purple said:


> The problem isn't wealth per say, it is the distribution of wealth between capital and labour. At present, largely due to money printing, wealth is being concentrate more and more in capital. That makes for a very unequal society and instability and, in my view, is unfair.
> The aspiration should be to accumulate wealth through retained earnings from labour. In other words retain earned wealth. We don't do that. We encourage the retention of unearned wealth (inheritance, capital appreciation etc) while taxing the bejeses out of earned income. We conflate income and wealth but we've devalued income by inflating wealth with quantitative easing.
> 
> This is a good paper from the World Bank on how to handle debt. It more than touches on this issue and points out how difficult it is to deal with this problem given the structures we have to work with.
> I think there is very little Ireland can do to fix this problem as we are a twig floating in the sea of global capital.


I don't think the split between unearned wealth and earned wealth is as clear as you make it out to be... yes, people have benefited from the asset boom but at least some of the people bought those assets with earned income. You would now be taxing the asset\wealth they paid (perhaps overpaid for).

I take your point though that quantitative easing,  a deliberate act of policy has changed the nature of the game to some extent, although the body responsible is also least responsible for the consequences. And that some measures to re-balance things may be needed, but what though, without unravelling things further... especially as you note we can't control the tides only steer through them.


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## Lockup (9 Dec 2021)

usually the ppl who go to the bank of mum and dad that want it renamed or person lucky enough to have parents with enough cash to be called a bank......so just count themselves lucky  and maybe be grateful


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## Leper (10 Dec 2021)

Some have rich parents, some have poor parents. Mine were the latter. Nothing wrong with that, but it was very awkward.


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## Steven Barrett (10 Dec 2021)

Purple said:


> But that is not what's happened. *Almost all of the wealth has been accumulated through capital appreciation, not savings from earned income. *That's what is fundamentally different in the last 10 years. What you are saying is the myth that is commonly peddled because it makes people feel virtuous; "look at me and how smart and hard working I was! Ooohh, aren't I great!" It's a very seductive spiel and who doesn't like flattery. The problem is it's rubbish and is fundamentally damaging to society.
> Until we acknowledge this we'll not solve our housing issues because current Government policy only exacerbates the problem.
> 
> And @Leper, I'm one of those people who is on the right side of the problem. I have the capital assets. Why? Because of my age, not my intellect or moral fortitude.



Where did the capital come from? Usually from earned income. That is what you are supposed to do to build wealth, get your money working for you so you don't have to do all of the heavy lifting. 

Being a business owner was traditionally the other way of building wealth. People taking a risk in themselves and creating a business, often creating employment for others while they are at it. Instead of putting money into capital markets, they put money into themselves. It usually takes decades for them to get a return from this high risk investment. 

Relatively new to Ireland is share option wealth. Those working for multi nationals who get share options as part of their package. Being in a bull market for over a decade has seen people's wealth rise exponentially with the continuous vesting of shares over that period in high performing companies. The share option wealth generation tend to be younger, so do not have children old enough to require money from their parents yet. 


Steven
www.bluewaterfp.ie


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## Purple (10 Dec 2021)

Steven Barrett said:


> Where did the capital come from? Usually from earned income.


Yes, usually, but not in the last 10 years. During that time it's come from just increasing the money supply globally. That money has flooded into the capital markets. 85% of the wealth in this country is in pensions and property. None of the increases in their value over the last decade have come from earned income.


Steven Barrett said:


> That is what you are supposed to do to build wealth, get your money working for you so you don't have to do all of the heavy lifting.


Yes, but if your earned income is being taxed at a marginal rate of over 50% and a massive chunk of what's left is going on rent there's not much for you to invest. There's income but no wealth. 


Steven Barrett said:


> Being a business owner was traditionally the other way of building wealth. People taking a risk in themselves and creating a business, often creating employment for others while they are at it. Instead of putting money into capital markets, they put money into themselves. It usually takes decades for them to get a return from this high risk investment.


Agreed. That's an excellent use of capital as it actually creates wealth.


Steven Barrett said:


> Relatively new to Ireland is share option wealth. Those working for multi nationals who get share options as part of their package. Being in a bull market for over a decade has seen people's wealth rise exponentially with the continuous vesting of shares over that period in high performing companies. The share option wealth generation tend to be younger, so do not have children old enough to require money from their parents yet.


That's their slice of the quantitative easing bubble. It's usually a small slice, dwarfed by the costs they incur for access to the inflated capital asset they need most; housing.


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## Brian McD (10 Dec 2021)

We already have one of the highest CGT rates in the world and very high inheritance tax rate kicks in at a low threshold. Just look at UK, Germany , Austria and many European countries.


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## Steven Barrett (10 Dec 2021)

Purple said:


> Yes, usually, but not in the last 10 years. During that time it's come from just increasing the money supply globally. That money has flooded into the capital markets. 85% of the wealth in this country is in pensions and property. None of the increases in their value over the last decade have come from earned income.
> 
> Yes, but if your earned income is being taxed at a marginal rate of over 50% and a massive chunk of what's left is going on rent there's not much for you to invest. There's income but no wealth.


You are making huge generalisations on these points. I speak to lots of "millionaires next door" type, (a lot of who are on this forum), who have decent jobs, save diligently and build up wealth over decades. They aren't into outward displays of wealth but are extremely wealthy and are financially independent because of it. They don't drive Bentleys or live in big houses. They saved, invested and grew wealth. It was a continuous thing. 

The more earned income you put into capital markets, the better you will do from them. There's a good guest blog on my site that explains it very well. 

Steven
www.bluewaterfp.ie


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## RetirementPlan (10 Dec 2021)

Brian McD said:


> We already have one of the highest CGT rates in the world and very high inheritance tax rate kicks in at a low threshold. Just look at UK, Germany , Austria and many European countries.


This list shows substantially higher inheritance tax rates in UK, Denmark, France, Spain, Germany, Belgium, Greece, Netherlands, Slovenia, Switzerland








						Estate, Inheritance, and Gift Taxes in Europe
					

The rates applied to estate, inheritance, and gift tax often depend on the level of familial closeness to the inheritor as well as the amount to be inherited.




					taxfoundation.org


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## Purple (10 Dec 2021)

Steven Barrett said:


> You are making huge generalisations on these points. I speak to lots of "millionaires next door" type, (a lot of who are on this forum), who have decent jobs, save diligently and build up wealth over decades. They aren't into outward displays of wealth but are extremely wealthy and are financially independent because of it. They don't drive Bentleys or live in big houses. They saved, invested and grew wealth. It was a continuous thing.
> 
> The more earned income you put into capital markets, the better you will do from them. There's a good guest blog on my site that explains it very well.
> 
> ...


No argument with those people or any of that but the wealth they have generated due to capital growth over the last ten years is due to quantitative easing and for many that constitutes a very large portion of that wealth. Those who are entering the market now are on the wrong side of the political decisions which caused that equity and property growth. 
There are people on relatively average incomes, say €80-€120k a year, who are accumulating half their gross earned income in net wealth each year in the form of capital appreciation, due to those political decisions. They are very comfortable and in a position to set their children up for their future, even if those children are on far lower incomes.
The people starting out now who don't have parents with wealth are screwed. If they earn €80k a year they pay €28k a year in tax, €24k a year on rent, make provision for their pension, pay their health insurance, save for a deposit for a house and feed themselves on the remaining €28k. Hardly a recipe for a comfortable future. 
The child of the millionaire next door has to do much of the same but they can look forward to help with the rent and a couple of hundred thousand towards their first home. That's a bit of a game changer, isn't it?


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## RetirementPlan (10 Dec 2021)

Purple said:


> There are people on relatively average incomes, say €80-€120k a year,


Your 'relatively average incomes' are 2x or more actual average incomes.


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## Purple (10 Dec 2021)

Brian McD said:


> We already have one of the highest CGT rates in the world and very high inheritance tax rate kicks in at a low threshold. Just look at UK, Germany , Austria and many European countries.


This thing I'm talking about is a problem across the Western World.

The Monopoly analogy works well here. Imagine there are 4 people  playing Monopoly. They give out the money as per the instructions and play away for an hour, buying property and passing Go. A fifth person wants to join after the first hour. If they start off with the same amount of money as the other have it is likely that they'll catch up or will they just end up landing on propertied which the others own, losing their money and getting dumped out of the game within a few rounds?
They all started off with the same amount and they all played by the same rules but was it fair?


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## Purple (10 Dec 2021)

RetirementPlan said:


> Your 'relatively average incomes' are 2x or more actual average incomes.


Yes, thanks. I'm making the point that a young person who earns a really good income is still worse off than someone on an average income who owns their own home.
Look at the Monopoly analogy above. If the fifth player starts off with twice as much money as the others, if they get twice as much for passing go, can they win? Can they even catch up? Or will they just be a cash cow for the other four players?


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## Protocol (10 Dec 2021)

2019 household income
Mean = 70,092 gross
Median = 51,217 gross


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## Protocol (10 Dec 2021)

Two anecdotal examples

Friend bought small industrial unit / warehouse in Clondalkin maybe 7-8 years ago.

He made more gain selling the unit in 2020, free of CGT, than he ever did while trading from the premises.  That is wrong.


My brother bough a modest terraced house in D8 in 2013/14, and has probably made more in unrealised capital gains since than than he has saved out of his modest wages.


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## RetirementPlan (10 Dec 2021)

Protocol said:


> 2019 household income
> Mean = 70,092 gross
> Median = 51,217 gross


I went by this, with average wages never getting over €50k








						Ireland average annual wage 2021 | Statista
					

The average salary in Ireland was 51,676 euros per year in 2021, compared with 51,378 in 2020.




					www.statista.com
				






Protocol said:


> He made more gain selling the unit in 2020, free of CGT, than he ever did while trading from the premises.  That is wrong.


Just curious, why would it have been free of CGT?


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## Gordon Gekko (10 Dec 2021)

The exemption that was brought in (from CGT for 4-7 years).

People also forget the power of compounding, with an asset over time gains are compounding tax free as you go along.


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## Leo (10 Dec 2021)

Lockup said:


> or person lucky enough to have parents with enough cash to be called a bank......


I think that's part of the issue, the people who were a little better off than those who couldn't afford property are now way better off not throught hard work but capital appreciation, and the ability to access that equity for their children's benefit is only serving to widen the gap and increasing the numbers who will never be able to afford to buy a home.


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## Purple (10 Dec 2021)

Leo said:


> I think that's part of the issue, the people who were a little better off than those who couldn't afford property are now way better off not throught hard work but capital appreciation, and the ability to access that equity for their children's benefit is only serving to widen the gap and increasing the numbers who will never be able to afford to buy a home.


That's it in a nutshell.


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## Purple (10 Dec 2021)

We are treating income  as wealth and ignoring actual wealth.
When you can make more money from activities which don't actually create wealth (property ownership) than from activities that do (traded good and services) then there's something wrong.


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## Firefly (10 Dec 2021)

Interesting topic! 

I agree that money printing and the resultant appreciation of house prices has disproportionally benefited adult children whose parents were lucky enough to buy a house years ago and who ( to quote Leo) "_release equity _for their children's benefit". However, I suspect many other parents are helping their children from savings, which had to be firstly earned, then paid tax upon and finally not touched over many years. An example of this would be saving the children's allowance, which is currently 140 per month, which over 16 years, comes to 26k...


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## Purple (10 Dec 2021)

Firefly said:


> I suspect many other parents are helping their children from savings, which had to be firstly earned, then paid tax upon and finally not touched over many years. An example of this would be saving the children's allowance, which is currently 140 per month, which over 16 years, comes to 26k...


Which is less than one years worth of capital appreciation on a family home in many of our cities.


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## Firefly (10 Dec 2021)

Purple said:


> Which is less than one years worth of capital appreciation on a family home in many of our cities.


I agree, but to release equity would mean a remortgate - personally, I would prefer to give the kids cash if I had the choice.


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## Dermot (10 Dec 2021)

Owning property is not a one-way street to so-called wealth.  If it were there would be no need for purchasing equities. Just look at all the people in negative equity even now and all the trials and tribulations that brought on people.  There are risks involved in purchasing a property and it is not always onwards and upwards.  There is a need for reward as well otherwise people will not take a chance.  Maybe go backing the favourite in every horse race.  
It was not until the big vulture funds came into the market that the high rental prices came into prominence.  That is another story.
Who is going to house the people in rental accommodation in provincial Ireland?  Not the vulture funds in my opinion.
It was never easy to fund your first house purchase without making sacrifices and I have very personal experience of that even 40 years ago


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## Leper (10 Dec 2021)

I'm sure people on a waiting list for a mortgage give a whit about "capital appreciation" and other jargon as perpetuated on this thread. 

Newsflash:- They want a place to live not cheap jargon.


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## Purple (10 Dec 2021)

Dermot said:


> It was never easy to fund your first house purchase without making sacrifices


True, but it is much harder now. I know that doesn't tally with the 'young people now-a-days' narrative but it's the truth. 
I bought my first place when I was 23. It was IR£56k. 18 months later I sold it for €81k. I used that money to buy a 4 bed semi in North Dublin for €89k. I sold that 12 years later for €535k. I made more money from that house than I took home after tax from my job in that 12 years.


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## Purple (10 Dec 2021)

Leper said:


> I'm sure people on a waiting list for a mortgage give a whit about "capital appreciation" and other jargon as perpetuated on this thread.
> 
> Newsflash:- They want a place to live not cheap jargon.


Then they are idiots because they are confronted with a problem that is blighting their lives and they are too lazy or too stupid to want to understand what that problem is. Instead they'll listen with open mouths to populist nonsense which won't help them one bit.

So I really hope you are wrong. I really hope they do care and care deeply.


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## Dermot (10 Dec 2021)

Purple said  "I bought my first place when I was 23. It was IR£56k. 18 months later I sold it for €81k. I used that money to buy a 4 bed semi in North Dublin for €89k. I sold that 12 years later for €535k. I made more money from that house than I took home after tax from my job in that 12 years."

"Yes Purple".  You took the risk and so did I but it might have worked/could have worked out differently for you and I'm sure you made sacrifices along the road.  Had it worked out differently for you would there have been a Government agency to bail you out at the time.  Just enjoy your good fortune and hope it makes up for your sacrifices in the past.
I can quote the reverse scenarios but I worked hard and dusted myself down and made sacrifices along the way again got to a comfortable position again.
Some people make life choices and "whinge" when their life choices conflict with reality.  I accept that that is not the case in every situation


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## RetirementPlan (10 Dec 2021)

Dermot said:


> Owning property is not a one-way street to so-called wealth.  If it were there would be no need for purchasing equities. Just look at all the people in negative equity even now and all the trials and tribulations that brought on people.  There are risks involved in purchasing a property and it is not always onwards and upwards.  There is a need for reward as well otherwise people will not take a chance.  Maybe go backing the favourite in every horse race.
> It was not until the big vulture funds came into the market that the high rental prices came into prominence.  That is another story.
> Who is going to house the people in rental accommodation in provincial Ireland?  Not the vulture funds in my opinion.
> It was never easy to fund your first house purchase without making sacrifices and I have very personal experience of that even 40 years ago


Why is there a 'need for reward'? This should be about homes for people, not about investment decisions.


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## Firefly (10 Dec 2021)

Dermot said:


> Purple said  "I bought my first place when I was 23. It was IR£56k. 18 months later I sold it for €81k. I used that money to buy a 4 bed semi in North Dublin for €89k. I sold that 12 years later for €535k. I made more money from that house than I took home after tax from my job in that 12 years."
> 
> "Yes Purple".  You took the risk and so did I but it might have worked/could have worked out differently for you and I'm sure you made sacrifices along the road.


I think it is normal expectation for people who buy a property to assume in the long run that, in financial terms, it's a good decision...it'll be worth more than you paid for it. However, that's a long way from the returns that have been made since we joined the Euro. Kids in the future, unless they have parents with cash or are happy to remortgage, will find it very difficult to ever own their own home.


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## Firefly (10 Dec 2021)

Dermot said:


> Owning property is not a one-way street to so-called wealth.


For anyone who bought a property more than 20 years ago it has been.


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## Firefly (10 Dec 2021)

Purple said:


> True, but it is much harder now. I know that doesn't tally with the 'young people now-a-days' narrative but it's the truth.
> I bought my first place when I was 23. It was IR£56k. 18 months later I sold it for €81k. I used that money to buy a 4 bed semi in North Dublin for €89k. I sold that 12 years later for €535k. I made more money from that house than I took home after tax from my job in that 12 years.



Ditto for me, however a shorter time frame and thus less in absolute terms, but yeah, my take-home pay didn't match the return I made on property either.


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## Dermot (10 Dec 2021)

RetirementPlan said:


> Why is there a 'need for reward'? This should be about homes for people, not about investment decisions.


That is the way the world works to answer your specific quote.  Maybe in Utopia it maybe different.  Why should there be a risk of a loss on the reverse of that situation which has happened.


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## Firefly (10 Dec 2021)

Dermot said:


> That is the way the world works to answer your specific quote.  Maybe in Utopia it maybe different.  Why should there be a risk of a loss on the reverse of that situation which has happened.


I beg to differ. People spend tens of thousands on cars, which are heavily depreciating assets. It should be a bonus if the house you buy increases in value, but first & foremost it's about putting a roof over your head.


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## Billo (10 Dec 2021)

Purple.
Well done to buy at only 23. Did you get help with the deposit ?


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## RetirementPlan (10 Dec 2021)

Dermot said:


> That is the way the world works to answer your specific quote.  Maybe in Utopia it maybe different.  Why should there be a risk of a loss on the reverse of that situation which has happened.


It's the way the world works because that's how we've set up the world to work. It might be time to think about whether this is the appropriate way for the world to work. There is something toxic in the political pandering to home owners, with every policy designed to keep house prices rising, because home owners are great voters. The younger generation (and perhaps not so young now, into the 40s in some cases) are paying the price for this.


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## Dermot (10 Dec 2021)

The car can be a lifestyle choice and I know numerous people who have purchased cars that are way in excess of their needs in practical terms and the repayments plus the rent would more than service an 80% mortgage.   They have very good jobs so the ability to get a mortgage would not be a problem for them.  That's a lifestyle choice.  Each to their own.  I am talking about provincial Ireland.


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## Brian McD (10 Dec 2021)

Anyhow looks like property & rents will keep rising for the next few years according to KPMG analysis undertaken for Dublin City Council. KPMG expect property price growth between now and 2028 to be 26%, while median income growth over this timeframe is forecast at 23.5%.  
Average Rents  however are expected to rise by 38%, or to over €2600 per month from €1885 currently.


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## Brian McD (10 Dec 2021)

Median house price Dublin €477k - KPMG Analytics - two people save €50k each by 30, require mortgage €377k , divided by 3.5 ( the multiple used by banks on joint income) = €107.7k required joint income / €53.8k per individual. While still high enough , think this is achievable for many by 30 who say have 7/8 years work experience behind them. 
Median income in Dublin , according to the KPMG report for 2021 is €54.9k


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## Sunny (10 Dec 2021)

Brian McD said:


> Median house price Dublin €477k - KPMG Analytics - two people save €50k each by 30, require mortgage €377k , divided by 3.5 ( the multiple used by banks on joint income) = €107.7k required joint income / €53.8k per individual. While still high enough , think this is achievable for many by 30 who say have 7/8 years work experience behind them.
> Median income in Dublin , according to the KPMG report for 2021 is €54.9k



Its a lot more complicated than that. Have you tried saving 50k by the age of 30 when starting out on your career and paying nearly two grand a month in rent? 
Factor in that you are assuming no woman decides to have children before the age of 30.
The median income for Dublin is 54k. The median income for 30 year old in Dublin is less than 54k.
There are thousands of people like nurses, teachers, guards, retail workers, transport workers, hospitality workers who are not earning anywhere near that.


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## odyssey06 (10 Dec 2021)

Sunny said:


> Its a lot more complicated than that. Have you tried saving 50k by the age of 30 when starting out on your career and paying nearly two grand a month in rent?
> Factor in that you are assuming no woman decides to have children before the age of 30.
> The median income for Dublin is 54k. The median income for 30 year old in Dublin is less than 54k.
> There are thousands of people like nurses, teachers, guards, retail workers, transport workers, hospitality workers who are not earning anywhere near that.


Even without the 'bank of mum and dad', the spare room of mum and dad is coming into play no?
Many people in those positions in their 20s in Dublin are still at home. They're not paying rent they are saving.
Not sure how you could equalise that advantage.


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## Purple (11 Dec 2021)

Billo said:


> Purple.
> Well done to buy at only 23. Did you get help with the deposit ?


No help. I'd been working summers, Easters and mid terms since I was 14, usually around 60 hours a week. I'd been working fulltime since I was 17 and had started my apprenticeship, usually around 60-70 hours a week. Therefore I had saved quite a bit. When I read about the pending drop in interest rates I knew there'd be a corresponding rise in prices so I sold my car and bought the most expensive place I could afford. That happened to be a small 2 bed in Dublin city centre.


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## Leper (11 Dec 2021)

Purple said:


> No help. I'd been working summers, Easters and mid terms since I was 14, usually around 60 hours a week. I'd been working fulltime since I was 17 and had started my apprenticeship, usually around 60-70 hours a week. Therefore I had saved quite a bit. When I read about the pending drop in interest rates I knew there'd be a corresponding rise in prices so I sold my car and bought the most expensive place I could afford. That happened to be a small 2 bed in Dublin city centre.


Well Done Purple (this is not the first time I've commended you on your early achievements). Purple was not alone in the general thinking back then. We bought our first house for €9175.00 (3 bed semi) - age 21. The mortgage was "made available" to us 12 months after the house was completed and we were forced by the mortgage institution (AIB) to take out a Bridging Loan from completion. Whatever way you look at this it added a year to your repayments and was a form of legal extortion used by all the banks in Ireland. I'm not going to mention interest rates rising to 19.75% where many now would not believe me, but rates like that were not unusual and I have the Home Loan summaries to prove it. I look through them occasionally and they keep me pretty well grounded. 

Most people back then (70's) were married by the time they reached their 26th birthday. These days the average blushing groom and bride would be nearer 40. Purple is one of many people who bought their first property in their early 20's. Like I already said, I commend his achievement, but he was only one of many. Most of people back then left school at 17/18 and went immediately to work wherever they could find it. In my case, it was the UK where I helped make the M1 a safer place for motorists by painting the amber on crash barriers. 

But, we were good people back then. You learned mainly from experience and didn't have your mind influenced to any great extent at 3rd Level. Most of us could think clearly earlier than what I think people do nowadays. 

Times were different then, much different. I'm not saying they were better times because they weren't. But, people had priorities and when the first house was bought it was empty except for a bed, cooker and a few necessities. Female Civil/Public servants had to give up their jobs on marriage (think about this for a while) - try that now and there'd be a revolution. Do I want to return to those times - No Way!


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## Purple (11 Dec 2021)

Leper said:


> Well Done Purple (this is not the first time I've commended you on your early achievements). Purple was not alone in the general thinking back then. We bought our first house for €9175.00 (3 bed semi) - age 21. The mortgage was "made available" to us 12 months after the house was completed and we were forced by the mortgage institution (AIB) to take out a Bridging Loan from completion. Whatever way you look at this it added a year to your repayments and was a form of legal extortion used by all the banks in Ireland. I'm not going to mention interest rates rising to 19.75% where many now would not believe me, but rates like that were not unusual and I have the Home Loan summaries to prove it. I look through them occasionally and they keep me pretty well grounded.
> 
> Most people back then (70's) were married by the time they reached their 26th birthday. These days the average blushing groom and bride would be nearer 40. Purple is one of many people who bought their first property in their early 20's. Like I already said, I commend his achievement, but he was only one of many. Most of people back then left school at 17/18 and went immediately to work wherever they could find it. In my case, it was the UK where I helped make the M1 a safer place for motorists by painting the amber on crash barriers.
> 
> ...


Jasus Leper, I'm not as old as you! 
Most of my classmates did go to third level. I was an outlier.
I think it was easier then (the early 90's) than it is now. If you has a half decent job and worked hard you had a reasonable expectation of buying a house. 

It's also worth pointing out that the absolutely best time to buy a house is when interest rates are as high as possible so you were very lucky to buy when you did. Not only does it mean capital prices (the price of houses) are depressed but inflation will also be high and so will eat big chunks out of the real cost of your mortgage each year. Remember that inflation compounds, interest rates don't.  

I don't think I has or have a stronger work ethic than people in their 20's have now. I was living at home and my mother was feeding me and washing my clothes. It was easy to work 6-6.5 days a week. There are plenty of people in college working 20-30 hours a week on top of studying. That's much harder. 
I also don't think I was an smarter or more grown up. I don't think I was more worldly or mature.


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## Leper (11 Dec 2021)

Purple said:


> 1. It's also worth pointing out that the absolutely best time to buy a house is when interest rates are as high as possible so you were very lucky to buy when you did. Not only does it mean capital prices (the price of houses) are depressed but inflation will also be high and so will eat big chunks out of the real cost of your mortgage each year. Remember that inflation compounds, interest rates don't.
> 
> 2. I don't think I was more worldly or mature.


On your second point you are underselling yourself. In today's terms you were ahead of the posse. No molly-coddling for young Purple. And it seems to have stood you in good stead. 

So, I should be delighted AIB Home Loans Dept increased my interest rate almost willy-nilly reaching a max of 19.75% where my monthly mortgage cost was actually more than my take home pay during the period. I think you got that one wrong. Even AIB refused point blank to increase the term of the loan. Today we're not too far short of the 100 year mortgage (I read on this forum where a guy has a 35 year mortgage).

There are so many ifs and buts it's a wonder that anybody can get a mortgage these days; it's also a wonder that they can get jobs (such are the demands now on the employer). When I see intelligent landlords (on guaranteed good income) on this forum getting out of the letting market because of all the obstacles strewn in their way, it sets alarm bells ringing in my ears. 

I don't have all the answers to Ireland's housing problems, but if somebody doesn't come up with them soon the situation will be irretrievable.


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## Thirsty (11 Dec 2021)

Steven Barrett said:


> The share option wealth generation tend to be younger, so do not have children old enough to require money from their parents yet


Multi-Nationals have been around for nigh on 30 years; some of us have managed to raise children to adulthood in that time!


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## Thirsty (11 Dec 2021)

Leper said:


> increased my interest rate almost willy-nilly reaching a max of 19.75%


I remember those days too; no sooner had you figured out how to re-align your budget, then the next increase was announced days later.

I cried when my 3 year old son was delighted he could pick two packets of biscuits at the supermarket because it was Christmas.

Would I wish those days on anyone?  No I flipping well would not.

Stuff the 'character' building rubbish; everyone needs a home.

There has to be a better way - it's surely not beyond our wit and intelligence to figure out how to do it.

Edit to add: it's my money, I earned it. If I choose to pass some on now to my children, that's my perogative.


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## odyssey06 (11 Dec 2021)

Thinking about this again... I think when people talk about the Bank of Mum and Dad they are not talking about inheritance.
They mean living parents helping adult kids with deposits for houses or cars or living rent free. So they are helping them with earned income or pension lump sums that kind of thing.

Im not convinced the demographics stack up in the last 10 years for it to be inheritances impacting property prices and by the time both parents pass on the adult kids are usually already established on the property market - if they are going to do so independently. If they are not then it is common for adult child to stay in the house.
With the inheritance, they are trading up and renovating, not directly pushing up prices for FTBs.


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## Gordon Gekko (11 Dec 2021)

I think it definitely has an impact.

To the point where if you’re looking at a place there can nearly always be someone with that additional firepower.

Very hard on someone with no support and simple mortgage approval who comes up against someone with support.

Especially as when, for example, parents give their kids €50k to help out, there tends to be more in the tank if a battle ensues.


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## Purple (11 Dec 2021)

Gordon Gekko said:


> I think it definitely has an impact.
> 
> To the point where if you’re looking at a place there can nearly always be someone with that additional firepower.
> 
> ...


And Granny will pop her clogs soon and leave a few bob and when the parents retire they'll get their lump sum form a State pension they haven't paid for or a private pension inflated by that same pesky quantitative easing. Then when the young home owner is in their 50's their parents will die and the real impact of intergenerational wealth will be felt. This problem isn't going away and the deeper it takes root the harder it will be to deal with.





Thirsty said:


> Edit to add: it's my money, I earned it.


That's the thing though, if you are talking about money in property and pensions/investments then you didn't earn it. Your assets have been grossly inflated by the political decisions which lead to vast amounts of money being created out of thin air to replace everyone's savings after the banks went bust and to generally maintain the financial markets. Capital growth has outstripped real wage growth by a factor of ten or more in just about every country in the developed world since 2008. Do you think that just happened all by itself?


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## Billo (11 Dec 2021)

Families are much smaller nowadays so inheritances are larger.


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## Gordon Gekko (11 Dec 2021)

Billo said:


> Families are much smaller nowadays so inheritances are larger.


And there’s more wealth being created.

Plus better advice and more structure.


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## Thirsty (11 Dec 2021)

Purple said:


> you didn't earn it


Yes, I did, have, and do.


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## Clamball (12 Dec 2021)

Purple you make very valid points but your experience is probably not typical.  You have been working about 9 years when you got your mortgage, nowadays people mainly start working between 23-26 after a third level education so 9 years working brings them to early mid 30’s before they have similar  purchasing power.

I entered the work force in the mid- late 80’s when it was very hard to get a job and hard to get decent wages.  I did not have generational wealth behind me so purchasing a house in the mid 90’s before house prices went sky high was very hard.  5 years later with a few kids we did a major overhaul of the house increasing our mortgage significantly, we were very broke but able to pay mortgage and crèches.  Now the oldest is working, the mortgage is paid off and we have cash savings from working full time and saving our income. 

So us giving our kids €3K each per year is a was for us to help them save a deposit, and in 10 years time when they look to buy they will have hopefully €50K from us.

 As others said we are in our 50’s now and 3/4 of the parents are dead and we did get a modest inheritance from one which had increased our wealth.  But it would have been so much nicer to get a trickle of that  25 years ago when we were buying.  And knowing our relatively straightforward struggles nice to help our children have it a bit easier.  I can remember a work colleague and his fiancé meeting for a walk twice a week for 3 years as they cut back on all socialising and lived at home to save money for that deposit. 

I don’t see our savings as anything but earned income (the inheritance was in the past 12 months so not really a consideration in my argument) and we worked very hard for it so spending on the kids is our choice and hopefully it will make their lives a bit easier.

But I still think you make a really interesting and valid point.


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## Purple (12 Dec 2021)

Thirsty said:


> Yes, I did, have, and do.


As I said, if the wealth is in property or the value of your pension then no, you didn't, haven't, and don't.
Obviously the wealth you have from earned income, as opposed to appreciation from invested earned income, then yes, you earned it.

Don't get me wrong, I'm in the same boat. I will be able to help my kids financially, I'll inherit money that I can pass on and I'm on the right side of the property purchase timeline.


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## Thirsty (12 Dec 2021)

@Purple My statement is clear enough without further argument.

In any event, pension contributions are made from earned income; employer contributions to pension are part of earned income (total compensation).

Economic development in the country also comes about from the labour & efforts of the people living here.

Whilst we may (with justification) look for better solutions to the societal issues facing us in recent years; the truth is that living standards in Ireland (and globally) have hugely increased in the last 100 years.


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## Purple (12 Dec 2021)

Thirsty said:


> @Purple My statement is clear enough without further argument.
> 
> In any event, pension contributions are made from earned income; employer contributions to pension are part of earned income (total compensation).
> 
> ...


No argument with any of that. I've pointed out many times here the wonderful egalitarianism of Capitalism relative to the tyranny of Socialism as a dominant political and social model. That doesn't mean Capitalism is perfect, or doesn't need to be tempered with a little Socialism. 
I'm simply pointing out that the growth in the value of your pension fund has nothing to do with you or your savings and everything to do with quantitative easing.


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