Owning a home is falling out of fashion around the world

The lesson is we should try to intervene as little as possible in the housing market, and let consumers decide the right balance between owning and rentingSoaring house prices that are stopping young people from getting their first foot on the property ladder. Greedy buy-to-let landlords, puffed up with tax breaks, pushing up prices. Nimbys and Greens stopping anyone from building, even on old industrial sites. 

If you listen to the debate on housing in this country, just about everyone seems to think those are the explanations for falling home ownership levels. 

 

But here is something very odd – and which no one seems to be discussing. It’s not just us. In fact, home ownership is falling right around the world. It is down dramatically in the US, in Australia, in Ireland and in many other countries as well. This tells us that something about the explanations for what is happening in this country does not quite add up. 

In truth, there is a global shift away from home ownership that may have as much to do with changing demographics, work and migration patterns, and global interest rates. And the lesson from that is we should try to intervene as little as possible in the housing market, and let consumers decide the right balance between owning and renting.

If it is a global trend, and there is starting to be plenty of evidence to suggest that it might be, then what might be causing that? In fact, there are plenty of things. The most important factor in the property market is demographics and the rate of household formation. Many more people go to university than previously, and that means they are likely to rent while they are studying, and will take longer to get a job that allows them to take out a mortgage. More couples get divorced, which means they are likely to rent while they are arguing over the home they used to own. Careers have become a lot more flexible, and migration between countries and regions has become a lot more common. In a world where everyone can work virtually over email and Skype, it is hardly surprising not quite so many people want to be tied to 30-year mortgages. 

It might also be, possibly not even consciously, an investment decision. Most developed countries are about to go into a long period of population decline. That may well prove bad for property prices. The millenials might not be buying because they sense prices will actually be much lower once all the baby boomers have finally died off. And they may be right.

DYI Comments:  The four biggest drags on wealth creation is housing, transportation, education and health care.  Over pay on any one of these and your ability to acquire stocks, bonds, investment RE is curtailed or out right suspended.  Thomas J. Stanley book Stop acting Rich and start living like a real millionaire  that the average millionaire would not purchase a house for more than 1.5 times income or renting the equivalent thus freeing up dollars to invest into their business' and for investments.

Here is a quote from Thomas Stanley:

"The data strongly indicates that this ratio of wealth building productivity is inversely related to the market value of one's home."

It is just that simple.  This blogger is now 60 years old and I've followed that track from day one when I joined the U.S. Army at age 18 right out of high school and it works!  You have have to have discipline and ambition to make it happen.  Will you get rich?  Most likely no but financially secure to where you call the shots instead of life shaking you around like a rage doll.

DYI