Owning your own home: a global look at home ownership and renting
Owning your own home
During 2019 to 2020, an estimated 15.4 million households in England were owner-occupied – 8.3 million homes (54%) were owned outright (no mortgage), 6.9 million (45%) were bought with an ongoing mortgage (yet to be paid off), and 202,000 (1%) were bought through shared ownership.
Despite this, UK home ownership rates are falling and have been for quite some time – especially among adults of prime working age. According to the Office for National Statistics (ONS), a third of 35-44 year olds were renting in 2017. This is a significant increase since 1997 when just one in ten 35-44 year olds were renters.
So are Brits more or less eager to buy rather than rent, compared to the rest of the world? Let’s take a look at the challenges both home buyers and renters face in the UK and across the globe. We’ll explore attitudes to homes to see where Brits stand on the great ownership vs renting debate.
The benefits of owning a house in the UK
There are a number of advantages to owning a home. Let’s take a look at some of the reasons why so many strive to get their foot on the property ladder.
A sense of achievement
If you’ve made it a goal to own a home, getting over the line is likely to make you feel accomplished. A recent study from YouGov found 76% of Brits who didn’t own a property have aspirations to buy one in the future. Often seen as a milestone in life, buying somewhere to call your own could help to motivate you to seek out and achieve other ambitions.
Creating a home
Owning your own house means you’re relatively free from design restrictions. You can do what you want with the interior of the property to make it yours. There’s no landlord dictating the colour of the walls or what tiles go in the bathroom.
You can decorate to your own taste – and even make more substantial, permanent changes, like building a conservatory or adding an extension, assuming you’re given planning permission. And you’ll be the one who benefits financially from any increase in value from these renovations.
Currently UK house prices are unpredictable, for example someone could buy and benefit from further price rises or they could buy at the peak of the property market and be impacted by prices going down. If prices go up some home buyers could make a profit if they choose to sell the property further down the line. For those who are looking to downsize in the future, this could be an option to free up some money, which may not have been previously available to them. If prices go down, the potential home buyer could reduce their equity or may be in negative equity.
The challenges of buying a house in the UK
Although home ownership might appeal to some, buying your own house won’t necessarily be easy.
The pandemic has triggered property prices to rise to unprecedented heights. According to the ONS, in September 2021 the average UK house price reached a record high of £270,000 – that’s £28,000 more than just a year before in September 2020.
This means potential home buyers will need to have bigger deposits to get on the property ladder. While you often need to give a first and last month’s rent deposit, this is unlikely to be anywhere near as high as the deposit needed when getting a mortgage on a home – which is usually 5-10% of the price.
House prices are rising around the world too. Figures published by Knight Frank show global house prices increased by 7.3% in March 2021. This is based on data from 56 countries and territories around the world. Turkey had the highest house price increase of +32% and Spain had the lowest house price decrease of 1.8%.
The property market is competitive, meaning there’s an increasing demand for homes.
The number of UK households has increased, mostly due to population growth, but also because the average household size has shrunk. According to the ONS, in 2020 there were an estimated 27.8 million households – an increase of 5.9% over the last 10 years. Single occupancy households have increased by 4% over the last 10 years too. The average household size in the UK is now just 2.4 occupants.
Despite growing demand, there’s limited supply. The overall rate of house construction in the UK has declined since 1980, according to the ONS. For example, only 188,860 homes were built in 2021 in England – just 74.9% of the number built in 1979/80, when over 251,820 new homes were constructed.
The benefits of renting in the UK
According to 2020 GOV.UK figures, around 4.4 million English households were in privately rented housing – that’s 19% of the total population. Here are some of the main benefits of renting in the UK.
As a renter, you’re free to come and go more easily than when you’re tied to property ownership. Depending on the length of your contract, renting means you can choose to move if the house or location no longer works for you. Having this kind of flexibility can be a convenient way to live.
A smaller down payment
The upfront costs of home ownership can be high. Usually, the only payment required for moving into a rental property is a security deposit – typically the equivalent of one month’s rent – although this will vary depending on the landlord.
Low maintenance costs
As a homeowner, it’s your responsibility to pay for maintenance and repairs. But, as a renter, this responsibility falls to your landlord. You don’t need to worry about forking out for a leaky sink or a faulty oven – it’s your landlord’s duty to fix these issues for you, without sending you the bill.
Faster moving process
The home buying process can be lengthy, especially if there’s a long property chain, sometimes taking months to be completed. By contrast the rental process is usually quick. Depending on whether someone is already living in the property, you may be able to move in within weeks, or even days.
The challenges of renting in the UK
While renting has its advantages, there are also drawbacks. Here are some of the most pressing issues renters could face.
With your landlord owning the property you’re living in, there’s a level of uncertainty that comes with renting. The price of your rent can be increased at any time depending on the type of tenancy you have – likewise, the landlord can end your tenancy. However, there is a legal notice period in the UK, and most rent rates come with an assured shorthold tenancy (a period in which rent cannot be increased). As GOV.UK highlight, your landlord must give you two months to move out – with a written notice.
As a renter, you don’t have the same freedom as homeowners when it comes to internal renovation. For example, you probably won’t be able to redecorate or even paint your wall a different colour without permission from the landlord.
Both home ownership and renting have their share of merits and detractors. The key is to assess where you are in life, and work out which is more financially viable or realistic for you. When all’s said and done, what’s most important is feeling happy, safe and comfortable with where you live.
Global home ownership and renting
Does the rest of the world share the same views and experiences of renting and home ownership as the UK? For a clearer picture, let’s look at the numbers.
With economic and cultural norms differing from country to country, rates of home ownership across the world vary. A report from Eurostat shows that although over two thirds of the EU population owned their own home in 2020 (70%), the remaining 30% were renting. This rate differs across the EU countries too.
The countries with the highest proportion of home ownership include Romania (96.1%), Slovakia (92.3%), Croatia (91.3%), and Hungary (91.3%).
In all EU countries, home ownership is more common than renting. However, the split is almost equal in Germany (50.4%), Austria (55.3%), and Denmark (59.3%). This shows that although owning a home is the most common way of living, a large percentage of people still rent.
Although Switzerland is not an EU member, the Eurostat figures show it has a higher rental rate than home ownership (57.7%).
Figures published by Trading Economics further show that the split between renting and owning varies from country to country. The most significant findings are:
- Eastern and northern European countries tend to prefer home ownership over renting. According to the data, Bulgaria has a home ownership rate of 84%.
Kosovo 97%, Estonia 81%, Latvia 81% and Poland 85%.
- Western and southern European countries tend to have a more even split between home ownership and renting. According to the data, Austria has a home ownership rate of 55%. Cyprus 68%, Denmark 59% and Luxembourg 68%.
- Asian countries tend to be more evenly split too. Hong Kong has a home ownership rate of 49%. Japan 61% and South Korea 58%.
Is renting overtaking home ownership?
With renting clearly growing in many countries, is it on course to overtake home ownership as the most common way of living? Renting vs. home ownership statistics show that the situation varies from country to country.
That said, it’s telling that renting rarely trumps home ownership. While Switzerland is an exception to the rule (owing largely to higher housing costs), most countries are in favour of ownership. It seems the demand to find a spot on the property ladder is as strong as ever.
Although rental figures are on the rise in many of the most populated countries around the world, the number of renters still needs to grow quite significantly to overtake home ownership as the most common way of living.
What renters think
A number of factors determine our decision, or ability, to buy a home, and there’s no right or wrong way to live. However, YouGov found that 76% of the global renters they profiled want to one day own a home.
The countries where the desire to own a home is the greatest are:
- Indonesia – 95%
- Mexico – 94%
- Spain – 84%
- Singapore – 84%
- India – 83%
In every country, at least 62% of those surveyed want to one day own a home, with the notable exception of Germany – where it falls to 48%.
The figures show that if you have ambitions to buy a house one day, you’re far from alone – on either a national or global scale.