BudgetReno

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Can home ownership actually be a bad thing?

I am against home ownership. This is coming from someone who just bought one. Home ownership in my opinion, ties me down. It makes me have to stay put, because of all the vested interest I inevitably placed, with a false sense of security that I may one day own it. But I know I don’t, not today, nor when the mortgage is fully paid up for.

Whatever the outlook for the “bubble” be, my personal take is home ownership in Singapore is robbing Singaporeans of their dreams. In our grandfather’s era, most do not own their own property till they are really old, and some still do not own a thing at their deathbed. But many were known to be entrepreneurs, the pioneers of this island we now call home. With their cashflow channeled into running businesses big or small, many have fed their families and some made their fortunes even with humble beginnings. If I had the choice, I would rather be mobile and just unplug-and-go to wherever opportunities knocks. Or use my disposal income to fund my start-up, rather than sink a large part of our family net worth into a piece of “land” up in the air, in the middle of nowhere and remain slave to a bank till I drop dead.

Some argue high home ownership rates in a country is actually detrimental to society progression and its people’s sense of fulfillment. As counterintuitive as this may sound, I fully agree with the statement. The Economist in Sept 2012 held a very interesting debate about buying vs renting and what high home ownership rates indicates of a country.

Here are some of the comments that I found interesting.

This commentator was describing about the US market, but totally relevant to Singapore as well:

A home is a highly leveraged and illiquid asset that often makes up a sizable proportion of a family’s net worth. The fiddling by governments only serves to pollute the pricing signals which sometimes lead to adverse events like the recent bubble. If the societal goal is to invest folks more in their local institutions, there are other less-distortive ways to do this. A reasonable person could argue that the cost of decreased labor mobility outweighs whatever benefit accrues from a high prevalence of home ownership.

And this comment just hits the nail at its head:

Dear Sir,

More importantly than the argument between owning and renting is the realisation by policy makers and the public that housing is a consumption good.

It may be preferable for some people to consume their housing through ownership rather than renting, just as it is for favourable for some to buy a car rather than to lease one, but in either instance you are consuming housing.

If this was accepted property price increases would long ago have been recognized for what they are: inflation. Appropriate policy action could have been effectively taken (higher interest rates, and measures to increase housing supply) and the global property bubble would never have been allowed to inflate.

While we lumber on in the illusion that housing is an investment, finite, inflation proof, and almost infinitely leveragable we will continue our cycles of property/economic/banking boom and bust.

What matters most is not whether housing is owned or rented. What matters is if it is affordable.

And one of my favourite comment…

Dear Sir,

The deeply ingrained and very understandable human goal of home ownership is so important to banks — as it enables them to exploit humanity on such a large scale as we have recently seen. It is also important to local governments who stuff their budgets with the tax revenues they levy upon people’s homes, with the homeowners having little ability to push back against the greedy tax takers.

How else can such perverse segments of American society as bankers and the racketeering enterprises called “local governments” grow their power base?

The innate human weakness which is the natural desire to own one’s home is the type of weakness that lends itself to predatory exploitation of the masses by those two oh-so-compatible partners in crime: banks and governments.

How could we ever take away such a rich opportunity from such a deserving duo?

We’ve all been exploited by the country’s two most deserving duo. Perhaps in my next life, I’ll choose to reincarnate as a PAP minister. Pays better than being a banker.

And finally, this one is way too sinister it gives me the goose bumps:

… so in an economy where everything instead of ‘For the King, Of the King and By the King’ is now ‘For the Corporations, Of the Corporations and By the Corporations’ and the masses descending ever faster towards abject poverty, I wonder if the new ‘Landed Nobility’ will be surprised when the mobs come for them?

How do we prevent this repetition? Home ownership is a good place to start. If you have a place of your own, and you can meet the mortgage, we all will benefit. I have my own house, and it may not be big, but it is mine. That gives me a voice and that gives me power.

Except in Singapore, its “landed nobility” (the >80% of Singaporeans who are home owners) have neither voice nor power.

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This entry was posted on January 4, 2014 by in Talk Big and tagged , , , , .
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