
Why are Brits so obsessed with buying their own homes? - fat-chunk
http://www.theguardian.com/money/2016/jan/14/why-are-brits-so-obsessed-with-buying-their-own-homes
======
jamescun
For me, wanting to buy is not about an investment. I want somewhere secure and
stable to live. The "dead money" aspect of rent versus a mortgage is just a
bonus.

It must seem alien to most in the west the sheer lack of protection renters
have in England (property law is devolved); it is based entirely in private
contracts, and what law does exist is rarely if ever enforced. Just last week
Parliament rejected an amendment requiring all rented property be "fit for
human habitation". Rent rises are not capped and often used to evict tenants,
the legal minimum notice for eviction is two weeks (this does not increase
with time rented), the landlord is required to carry out repairs but notifying
them of such can be grounds for eviction.

These may be the extremes of renting in England; however you can ask any
renter about being charged outrageous contract fees, referencing fees and
being screwed over on leaving over the deposit and "cleaning fees" (even when
the property is left in a professionally cleaned state). There is little-to-no
repeat custom in renting so they get away with it.

Little movement has come from either of the two main parties (Labour &
Conservatives) to improve this, thus to have stable accommodation you have to
look to buying.

~~~
themartorana
It does seem odd to me (in the US). Renting here is not without risk and slum
lords and rising rents, but there is a minimum expectation of consumer
protection, much in the same way there is with most transactions.

Either way, if you care to live anywhere near a city, housing prices are
astronomical. We make a decent living, my wife and I, but still don't have
what it takes to buy a two bedroom apartment in one of the cheaper cities in
the country. We've been house poor before, and I'd rather not be again.

I mean I get it - fixed mortgage means in 10-15 years my mortgage may be less
than rent of something similar, but that's a long time to be house poor.

~~~
cthalupa
Honest question: Is your credit bad?

Even adding in PMI, property taxes, a 30 year rate, etc, the mortgage of house
should be about the same, and often less than the rent unless you just can't
get a good rate. A landlord has to make money, including the costs of longterm
upkeep, replacing things like the air conditioner, paying real estate agents
their commission, etc.

If you can't make a 20% down payment I've seen PMI be enough to push it to a
bit over what the rent would be at the house, but that certainly shouldn't
take you 10-15 years to pay off and get out of PMI range.

The only thing I can figure is you have a significantly higher interest rate
than people would get in the 'average credit' category

About the only places where I've ever seen this not be true is where rent
control is in effect.

~~~
themartorana
Ha, no, my credit is stellar. But I live in a nice neighborhood of
Philadelphia. My 1000 sq ft 2 br apartment costs $2300/m in rent. (I'm aware
it's a lot cheaper in other neighborhoods, but I love living here.)

To buy my apartment (and this is just for the apples-to-apples comparison)
would cost in the neighborhood of $485,000. If I put $97,000 down (about 20%
to avoid PMI) I'm looking at around $2350 inclusive of taxes. However, there's
HOA fees. Here they cover all (yes ALL) utilities, but they're $890/month for
this apartment. Now I'm out $97,000 in liquid cash, my monthly payment is
$3240 inclusive of HOA.

I can easily get the loan, but in the city, it's not always cheaper to buy.

~~~
tobylane
I'm not familiar with HOAs. You pay them, they pay your utilities? How much
are the HOA and utilities worth when they are apart?

~~~
ghaff
I imagine the arrangements vary on whether utilities are included as part of
homeowner dues. The cost of utilities will also vary a lot depending on the
climate and your type of heat etc. In my case (house in Northeast without
central air), oil/electricity/water/propane average out to the $300ish/month
range.

------
scholia
It makes sense to buy a house because, over the long term, the value of houses
goes up while the value of money goes down.

Even better, the real cost of mortgage payments keeps going down (thanks to
inflation) while the real cost of rents keeps rising. My house would now rent
for around 3x my mortgage payments, except I paid off the mortgage more than a
decade ago so my rent is zero.

There's always a chance house prices could collapse, but that's unlikely in
the UK. First, it's a small island with a rising population so there is real
demand, mainly in the south of England.

Second, it's seen as a "safe haven" so foreigners are buying houses in the UK
-- new developments are actively marketed in China, Singapore etc.

Third, if you buy a house and rent part or all of it out, the tenants will pay
the mortgage for you, and they really have no choice. Governments supporting a
"property-owning democracy" (a Conservative Party ideal) have made it harder
to rent by selling off social housing, removing rent controls, giving tax
allowances on mortgages etc.

Historically, on average, buying a house has been a one-way bet in the UK for
around 50 years. It seems pretty much insane to imagine that this will always
be true, but it has been true for my entire lifetime.

~~~
lewiscollard
> over the long term, the value of houses goes up while the value of money
> goes down

That which cannot go on forever, won't.

> There's always a chance house prices could collapse, but that's unlikely in
> the UK.

The population in Britain was 58.95 million in 2000 and is currently 64.04
million.[1] In the same time house prices have risen by an average of 153%.[2]
It's reasonable to subtract baseline inflation from that at 55%[3], in which
you STILL end up with a 98% increase. And I'm not ignoring the silliness in
London; nearly every region of the UK has seen near-doublings of house prices
since 2000, with a population increase of about five percent.

Simple supply and demand dynamics are not at work here.

> It seems pretty much insane to imagine that this will always be true

Yes, it certainly does. I'm sure there was a crisis not so long ago where lots
of people were betting on house prices continuing to go up for the foreseeable
future which didn't end too well.

Maybe, just maybe, the problem is too many people thinking of housing as an
investment?

[1] [http://www.worldometers.info/world-population/uk-
population/](http://www.worldometers.info/world-population/uk-population/) [2]
[http://www.nationwide.co.uk/about/house-price-index/house-
pr...](http://www.nationwide.co.uk/about/house-price-index/house-price-
calculator) [3]
[http://www.thisismoney.co.uk/money/bills/article-1633409/His...](http://www.thisismoney.co.uk/money/bills/article-1633409/Historic-
inflation-calculator-value-money-changed-1900.html)

~~~
gozur88
>>The population in Britain was 58.95 million in 2000 and is currently 64.04
million.[1] In the same time house prices have risen by an average of 153%.[2]
It's reasonable to subtract baseline inflation from that at 55%[3], in which
you STILL end up with a 98% increase. And I'm not ignoring the silliness in
London; nearly every region of the UK has seen near-doublings of house prices
since 2000, with a population increase of about five percent.

>Simple supply and demand dynamics are not at work here.

Price curves aren't linear. If you have a market with inelastic demand, small
shortages can produce huge price increases.

------
theinternetman
As a brit born a few years too late for this to be a sensible possibility at
all I'm sick and tired of the social pressure from every angle telling me I'm
not a real adult until I have a mortgage.

~~~
outside1234
Your response to that should be: "you are not a responsible adult until you
are debt free."

That is actually one of the secrets to a lower stress longer lasting life IMO.

~~~
ape4
There is a stress in renting too. You never know if your landlord might want
to change things resulting in a request for you to move out. eg he wants
relatives to have the apartment, etc.

~~~
Mikeb85
No landlord would want their family renting the place in lieu of real tenants.
Real tenants pay, on time. Family likes to take advantage of you (ie. they
find excuses to pay less or not at all).

~~~
dpark
Family is a convenient way to push out tenants in many cities, though. Even
cities with strong tenant protections often have exceptions for evicting
tenants in order to allow family members to occupy the rental.

------
JumpCrisscross
> _My parents rented the family home in Paris for 45 years, and although they
> did buy a seaside flat and a cottage in the country in the 1970s, their
> value has only kept pace with inflation_

American home prices only started rising, in real terms, after WWII [1]. This
is driven by people wanting to drive more income to buying land, i.e. treating
land as a superior good. Growing government intervention is also a cause.

In the long-run, real house prices appreciate at the rate of inflation. This
effect is stable across countries, cultures, and centuries [2]. It vanishes in
the short term amidst the noise of credit markets.

Can't find the source at the moment, but the most fascinating study on the
subject looks at asset prices in Austria-Hungary and surrounding states. The
story is uncomfortably familiar. Decade after decade, credit-fuelled gains
were safeguarded in the form of development restrictions. This served to
transfer wealth to the landed elites.

[1]
[https://www.dallasfed.org/assets/documents/institute/wpapers...](https://www.dallasfed.org/assets/documents/institute/wpapers/2014/0208.pdf)

[2] [http://www.amazon.com/Houses-Historical-Analysis-Property-
Pr...](http://www.amazon.com/Houses-Historical-Analysis-Property-
Prices/dp/1907994017)

~~~
Mikeb85
> In the long-run, real house prices appreciate at the rate of inflation.

Some one should tell this to Canadians. Since the early-mid 2000s, house
prices have been rising much quicker than inflation, to the point where people
think homes are an 'investment' that will always rise, leading to a massive
housing bubble (also propped up by foreign buyers, many of whom are using land
to launder money gained through corruption, and Canadian banks/government just
look the other way) and also unaffordable housing for young prospective buyers
and tenants.

~~~
goalieca
I'm really concerned. Take a look at Vancouver.
[http://m.realtor.ca/PropertyDetails.aspx?PropertyId=16209292](http://m.realtor.ca/PropertyDetails.aspx?PropertyId=16209292)

The thing to remember about that city is that incomes are pretty low (unlike
sv)

------
shhudson
For some reason this is a really popular topic to drag up on a slow news day
in the UK. The facts are that UK own-home ownership is actually quite average
compared to other European countries and others around the world. Wikipedia
has a helpful table [1] about this topic.

The UK ranks 37th lowest out the 46 countries included. France is nearly the
same. Germany and Austria are the only two large European countries that are
lower.

[1]
[https://en.wikipedia.org/wiki/List_of_countries_by_home_owne...](https://en.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate)

~~~
oneeyedpigeon
It's also interesting to note that, contrary to the tone in the original
article, those countries near the top of the list are hardly paragons of
capitalism.

------
CM30
An Englishman's home is his castle?

Maybe it's simply that owning a home lets you do more with than renting one.
You can add extensions, remodel much of it, potentially demolish the entire
thing and rebuild it, that sort of thing.

~~~
nextos
Actually, as someone renting several flats in the UK during the last few years
I'm still shocked by the lack of rights I have as a tenant.

For example, landlords can enter your property by only giving you a 24-hour
notice in writing. I have had real state companies entering my flat _without_
prior notice to show it to potential new tenants several times.

Other countries in the EU would take these incidents very seriously. And I'm
talking about expensive flats (>$2000 / month) and reputable companies, so I
imagine it can get much worse.

~~~
cstross
Those landlords are breaking the law (and the terms of your tenancy) and I
believe you can file a report with the police that will get them into very hot
water with their local council -- potentially fined and booted off the
register of landlords (which means it'd be an offense for them to let any
flats out at all).

Source: my sister is a landlord.

~~~
eterm
England doesn't have a register of landlords, anyone can let out property.

~~~
semanticist
Scotland does:
[https://www.landlordregistrationscotland.gov.uk](https://www.landlordregistrationscotland.gov.uk)

------
Al-Khwarizmi
_The old Catholic distrust of money and profits permeates our view. This is
probably why generations of French people, my family included, have never
fantasised about owning their home. We didn’t have to. It didn’t make any
sense and wasn’t an ambition in life._

Spain is also a Catholic country and everyone has always wanted to own a home,
as in the UK. Lately there are more rented flats but the reason is sky-high
house prices and low income, not that people like renting.

------
oneeyedpigeon
A: because renting is so expensive. We have no rent caps in this country, so
it's actually cheaper to pay off a mortgage than it is to rent. Plus you
actually get to keep that money rather than having it line the pockets of a
landlord. Plus house prices are increasing at a much higher rate than
inflation. So it's a triple win.

I had to rent for almost 20/years before I could afford the deposit on a
house, but I'm glad I finally could because I simply couldn't afford to rent
any longer, even though I would've quite liked to.

~~~
hackerboos
Renting is also extremely unstable in the UK. Most tenancy agreements are 6-12
months and you can be turfed out after the term with no reason whatsoever.
Landlords are also allowed to increase rents as much as they like between
tenants.

Contrast this with Germany's system -
[http://www.telegraph.co.uk/expat/expatlife/11417359/Germany-...](http://www.telegraph.co.uk/expat/expatlife/11417359/Germany-
the-country-where-renting-is-a-dream.html)

Estate agents are also a huge problem. They charge the landlord and the tenant
to put an agreement together. Tenants are charged every renewal - sometimes
£200 for what is essentially a piece of paper.

------
_puk
The UK has historically been a society where the poor majority worked the land
and rented from a few wealthy landowners. [0]

This builds a psyche whereby to own land becomes a social status.

Bring into that heady mix the likes of Maggie Thatcher's "right to buy" [1]
scheme, whereby the lesser class (council house residents) are in a position
to buy their homes at a fraction of their apparent worth, and suddenly you
need to own your house or be seen to be less than those that do.

Then a new generation comes along and sees that their parents "foolishly" sold
off a couple of houses years ago that would now have been worth a mint, and
everyone must buy a house else be caught out like their parents.

Buy to let then brings in the mentality of "why would you give money to
someone else to pay off their mortgage when you could be paying off your own?"
and everyone must buy as early as possible.

Pure conjecture on my part.

0:
[https://en.wikipedia.org/wiki/Social_structure_of_the_United...](https://en.wikipedia.org/wiki/Social_structure_of_the_United_Kingdom#History)

1:
[https://en.wikipedia.org/wiki/Right_to_Buy](https://en.wikipedia.org/wiki/Right_to_Buy)

~~~
SixSigma
You also got rent-for-life arrangements at not unreasonable cost

------
stegosaurus
So there's food, water, and shelter.

You can get by as a vagabond without a stable source of these - but let's
assume that particular lifestyle doesn't appeal (I've tried it. Fun for a
while.).

You can work, for an amount sufficient to subsist - and nothing more. A
lifetime of work.

You can be independently wealthy. Not much to say there.

Let's say we're between 2 and 3.

How do you get towards 3, if you're in 2? Realistic options, no lottery wins
here.

Well, you can save some of your income. Maybe that'll be enough, and maybe
you'll eventually have enough to be able to rent until there's no more you.

You can try to improve your income. To do that, it helps if you're mentally
fit. Having a table at home to eat at; having a computer setup if you're a
remote worker; a nice bookshelf; whatever. Things help. It's hard to work for
years on years in material discomfort to build a retirement fund.

So you own some of these things, and you rent.

Every so often, perhaps every year, all of that Stuff gets bundled up. Boxed
away; sent in transit. You remove shelves; buff up floors; repaint walls. Then
you sit and wait for the bill from the landlord.

Bugger, that's a hefty deduction. Next time, you'll be a bit smarter, I
suppose. You won't drill that hole in the wall. You won't pester about the
broken washing machine.

The cycle continues. Maybe you alternate material discomfort.

Eventually, though, you're probably going to get tired of it. Because
fundamentally, you're doing all of this not because you want to, but because
you have to - you can't rely on the landlord to provide you with stability.

What next?

------
toredash
Same situation in Norway. But the tax incentives are so many that if you can
you should buy, from an economic perspective. of course there is risks. And if
mobility / freedom is weighing more than money, maybe you shouldn't buy?

~~~
ra1n85
I find mobility to be a valuable asset. That may be a byproduct of working in
the technology industry.

~~~
spdustin
I work in the technical industry. A "founder", even. I've been in the same
house for 14 years. Owned my business a bit longer than that.

~~~
ra1n85
What area?

~~~
spdustin
Chicago suburbs.

------
banku_brougham
Can't pick just one comment to respond to. Short version: y'all are bonkers.

Assuming that home prices can only go up is harmless when that mortgage is
manageable. But holding on through several business cycles is problematic when
debt service is a high proportion of income. If you miss a few payments you'll
learn that you never really owned the home.

Again, the harmless part I mentioned applies to many places but certainly not
London.

------
nnutter
I've always thought the point of owning a home is so that you have a place to
live that is paid off when you retire. From what I've seen renting usually
costs more than the mortgage + property taxes + insurance; of course there are
still maintenance costs which are more ambiguous. But a large portion (~50%)
of my "mortgage payment" is going into equity instead of going into a
landlord's equity. If I wanted to rent and save enough to be able to rent
during retirement (or to save enough to be able to buy my retirement home at
retirement age) then I would have to be spending significantly more per month
until retirement. Going into debt by taking a mortgage is a trade-off that
makes sense to me given low interest rate and no depreciation in value
(hopefully appreciation).

Edit: This is a US perspective but we've had the same question posed here.

Edit: The article's title is misleading. It conflates buying a home with
irresponsible use of debt.

------
hestefisk
From an Australian perspective, this is an interesting read. I live in Sydney
where houses are so unaffordable that it is cheaper to rent. Protection for
landlords and tenants is pretty good and balanced, and in times where nutcases
would gladly spend in excess of 60% of their monthly net income on a mortgage,
I would rather wait and see until the market has settled. Analysts say the
market is about to burst and that, for first time in history, it is considered
more feasible to rent as opposed to buying and selling the property 30 years
later (the NPV would be less than if I kept the money in a high interest
savings account). Property is all the craze here, but soon the average Aussie
will wake up with a huge financial hangover.

------
djsumdog
Debt: The First 5000 Years

Read it. All of this and so much more is explained within. The history of
money, credit, coin, slavery...they're all related. It's a life changing book.

------
rconti
As an American, this is hilarious to read, given how high British mortgage
rates are compared to those in the US, and how home ownership is so often
considered to be "the American dream". Also, the brits I know (who do not live
in London) aren't so cutthroat about money. Again, I think they'd accuse
Americans of being that way.

But this may be true of Londoners.

------
nickpsecurity
This could be rephrased as, "Why aren't Brits happy to be landowner's serfs or
banker's future target?"

Then, it's so ridiculous that it doesn't merit an answer. If they need help,
there's tons of people from 2008 onward that can tell them all about the risk
of the alternative.

------
adblocker9877
Sponsored by: Lloyds Bank

An article sponsored by a bank trying to persuade you to get a mortgage. How
original!

------
mgiannopoulos
So how do we explain this?

\- Home ownership rates

37 United Kingdom 64.6

38 United States 64.5

39 France 64.3

Source
[https://en.m.wikipedia.org/wiki/List_of_countries_by_home_ow...](https://en.m.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate)

------
abritinthebay
As a Brit in the US I don't feel the pressure is much different here.

It's a little resigned and accepting that in a big city you can't afford it,
but it's still _expected_ that eventually you'll move to the suburbs and have
a home.

That's not surprising though as owning a home is generally about two things:
financial responsibility and stability (obviously desirable), and actually
_owning_ the place that you live.

"A place to call your own".

Now we debate if that last one is actually useful but it's not hard to
understand it. At this point it's a cultural force too. Also understandable.

~~~
lkrubner
> but it's still expected that eventually

> you'll move to the suburbs and have a home.

That might be true for the whites, but I don't think that expectation exists
for the blacks or hispanics or Koreans or Chinese or basically anyone. I've
known affluent Koreans who dream of eventually being wealthy enough to buy
apartment buildings, but I don't know any who want to move to the suburbs.

~~~
abritinthebay
Sure, the suburbs was probably a bad general example (though a majority one).
However most minorities that I know still have a house or condo in their
plans.

Wherever the location the desire is real

------
elcct
That article just tells that France is more fascist than the UK and their
government arbitrarily decided that their people are too dumb to manage their
finances.

~~~
oneeyedpigeon
Authoritarian != fascist

~~~
elcct
Social engineering is an element of fascism.

