Monthly Archive: February 2016

Should we Own a Home?

It was the anglo-saxon world’s favourite economic game: property. No other facet of financial life has such a hold on the popular imagination. In the English-speaking world and also increasingly in other countries, it has become a truth universally acknowledged that nothing beats bricks and mortar as an investment. But should you really own a home? Unless you have 20 million bucks in the bank, in cash, you have no business buying a house.

People think the only way to save money is to buy a house. Maybe you will get your home paid off when you are old. But who wants to wait until they are old to have money? A home is not an investment because it doesn’t pay you every month. In fact, you have to pay it every month.
That is why a house is not an asset, it is a liability. Nothing is a good deal if you have to feed it constantly.

People ask, “Why would you pay rent when you could buy?” Because you cannot leave. Who wants to go to jail for 30 years? You can be mobile and nimble if you rent. Mobility is a great thing in today’s world. Why settle down? Invest the money in yourself or your business. If you want a great opportunity to create income for yourself, realise that America is becoming a nation of renters!

The house, much like a college education, has been fed to us as the bourgeois dream. It is a middle class myth perpetuated by outdated thinking, politicians and mass media. The English-speaking world’s passion for property has also been the foundation for a political experiment: the creation of the world’s true property-owning democracies (the EU included).

Buying a house may have worked for previous generations but old ways of doing things are not viable in 2016. We are not in the 1950s, things have changed and people refuse to adjust. There are three considerations to bear in mind when trying to compare housing with other forms of capital asset (Ferguson, 2008):

  1. The first is depreciation. Stocks do not wear out and require new roofs; houses do.
  2. The second is liquidity. As assets, houses are a great deal more expensive to convert into cash than stocks.
  3. The third is volatility. Housing markets since WWII have been far less volatile than stock markets.