Why We're Obsessed With Buying Property

Neil Faulkner sucks all the fun out of the debate about why we're desperate to own our homes, and then he puts it back in again.

I'm now going to suck all the philosophy and debate, and hence all the fun, out of the discussion about why we in the UK are so desperate to own our own homes. And then, in a shock twist, I shall attempt to put them back in again.

An unhealthy comparison

Relatively few of us have private-medical insurance compared to residents of the US, where maybe 90% buy the insurance. Either we're out of our minds or Americans are obsessed with unnecessary private insurance.

...Of course, that argument is clearly flawed. Most of us here don't have private cover because we have the NHS. America has nothing like the same level of free support for all its residents. Therefore, Americans use private cover.

The difference is therefore not down to differences in our societies. Americans are not more concerned abut hitting their thumbs with a hammer than us. The difference is down to technical and legal reasons.

Home-buying comparison

It was easy to remove sociology from that one, but it may be that it's less obvious what the technical and legal reasons are which cause UK residents to be so keen to buy their homes. Here's a recent comment from a reader:

'It's a great time to be a buy-to-let investor if you have the cash and are confident of finding tents. The supply of tenants is likely to improve as more people lose their jobs and go onto Local Housing Allowance or generally retrench. With house prices falling so rapidly, investors can virtually name their own price to ensure high rental returns.

All this makes me wonder if we are going to see a significant fall in the number of people owning their own home in the UK, and more renters as we find in Germany, Switzerland and so on. There is an argument that this would be no bad thing - it would improve labour market mobility, lead to greater numbers of professional landlords, and less house price volatility, because a lot fewer people think that owning a house is something that makes economic sense for them. Germany is sitting very nicely at the moment - no house price rises since 2000, a huge balance of payments surplus, improving unemployment figures and a relatively strong currency - contrast this with the UK!'

There are lots of ponts for debate in that comment, but let's stick to my point about why we buy more than in other countries.

The above is a fairly typical comment on the UK versus other markets. Germany is the favourite comparison for Fool readers, presumably because only around half of Germans buy. People say that Germans aren't obsessed with buying, hence the more stable house prices.

But why aren't Germans 'obsessed' wih buying? The normal answer is that it's a different culture, that the reasons are sociological. However the real explanation is that the rental system works entirely differently in Germany.

Tell me they didn't take the radiators!

To start with, when you move into a rental property in Germany, the previous tenant has in most cases stripped everything out of the flat. I really mean everything. They don't just take the lightbulbs, they take the bit the lightbulbs go into, leaving the exposed wires hanging from the ceiling. They take not just the curtains, but the curtain rails. They don't just take the washing machine, they take the kitchen units and surfaces, too. The radiators are all that's left. 

Alternatively, you negotiate to buy all these things from the previous tenant. That's because the landlord doesn't usually fit any of these things - the tenants do. This is just one part of the German renting/buying system that makes renting a home more permanent there.

Is it because we're nomads?

German renters will spend a lot of time renovating and decorating. The average renter in the UK doesn't decorate much and is more likely to be nomadic. This isn't the twist I promised. We aren't more nomadic for sociological reasons. We're more nomadic because seemingly every six months our landlords give us notice that they want to sell up.

And now we reach the main reason why Germans are more comfortable renting. In the UK, landlords can kick us out for any reason they like by giving two or three months' notice. In Germany, the landlord cannot kick you out. If the landlord wants to renovate and sell up, he must bribe you to leave. You could expect a payoff of several thousand euros, plus hundreds of euros knocked off your rent for several months. Your landlord could also be obliged to help you find somewhere else to live. It's not unheard of for a landlord to pay a full year's rent to a tenant to get them out.

Back to Britain: when you've been kicked out twice because your landlords have had enough stress worrying about what you'll break next, you've had enough of renting. The only way for most of us to get a permanent home in Britain is to buy.

Perhaps it's our different cultures that led to these different systems in healthcare and renting in the first place...And there we are: I've restored the more interesting philosophical discussion for you!

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