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Home ownership- A very British tradition?

Posted by Mike Carey on 11th May 2016
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Many of our cousins on the continent view our obsession with home owning with a degree of bemusement at least, and horror at most, as renting for them is considered the norm. But what’s at the heart of that great divide? Many suggest that its simply because across the water, people are more risk adverse and debt, in terms of a huge mortgage, is considered a social disease. They would never dream of borrowing money and spending what they didn’t have. That’s the thing: Britain invented capitalism (and speculation). We are taught to spend and make profits; the French, for example, learn to save. Two different schools of thought, two different outlooks on property ownership. The British attitude towards property, the desire to make money out of buying and selling it, is viewed as pure speculation on the other side of the Channel. spend-save.jpg There’s an entrenched distrust of money and profits that permeates that view. This is probably why generations of French people, have never fantasised about owning their home. They didn’t have to. It didn’t make any sense and wasn’t an ambition in life. If you do buy property in France, it is usually to live in it or enjoy it, rarely to redo and sell on for a quick profit. In the UK, there’s a different mindset. Thirty years’ ago you needed to get your foot on the property ladder as early as possible, with the help of family if possible, the complicity of a bank manager and the madness to think that you could live happily with the burden of a 25-year mortgage so big you would need to share your home with a lodger and restrict your evenings out until at least your 30s. If you failed to do so, you were considered at best eccentric, at worse a failure. Then, 10 years later, you would reach the second step on the property ladder, this time with a partner and baby in tow. You might have made a good profit on your first home but since you would have to reinvest it all in a larger property and take on another crushing mortgage, you’d still be on the hamster wheel. homeownership.jpg But the British are among the most indebted people in the world. At the end of 2015, we personally owed almost £1.5trn (yes, trillion…), and the Office for Budgetary Responsibility forecast puts household debt in 2019 at 182% of disposable income – more than twice as much as in France. This is mostly driven by mortgage debt, but also by the heavy use of consumer credit. In France, even if you want to borrow yourself to death, as in Britain, you can’t – the law doesn’t allow it. Monthly repayments, to pay off a mortgage for instance, cannot exceed 30% of your income. In other words, in France the legislators make sure you have enough left every month to live properly. So while the French are left to enjoy life’s many modest pleasures, courtesy of legislators who look after them like mother hens, the British live more dangerously, and by doing so sustain the country’s infrastructure. In other words, while the French save, we spend; while they rent, we buy, sell and buy again. And we make the British economy roar. As they say, no pain, no gain.