Jamie Wheatley

Fear of buying

The global switch from buying to renting...

Jamie Wheatley
|
20th August 2013
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The global switch from buying to renting...

Where we once were a nation of homeowners, we are now officially a nation of home renters as we join a global trend that has seen the property markets dissolve and largely disappear in many once-prosperous countries.

Property as an asset class has taken a monumental battering by anybody’s standards and the owning of property has become negatively psychologically ingrained as a risk too far in the minds of those who witnessed the catastrophic effects of the bursting of the last bubble, and are loathe to get involved in the next one. This reticence is largely due to three phases of fear.

1.    The fear of getting stuck with a property that’s impossible to sell

As a long-term investment, it is customary that during ownership of a property, you switch from one house to another - smaller to bigger, or move from one geographical location to another due to family, schools, and work considerations..
The biggest fear among house owners is that they will not be able to resell the house and they will be stuck with the wrong property in the wrong area at the wrong price, which becomes a self-fulfilling prophecy when people aren’t buy houses anyway.

2.    The fear of rising Interest rates

Just about every major economy in the world is teetering just above the 0% interest rate mark. Good news for mortgage holders, but not so great for savers. However, despite the fact that Mark Carney, the new Governor of the Bank of England, doesn’t expect interest rates to rise until 2016, or until joblessness hits 7%, the interest rate couldn’t possibly get any lower and they must rise sometime. People are overly conscious of the speed with which interest rates rise, once they start, especially those who suffered in the early 1990s when interest rates increased six, seven and eight times in quick succession. Many found themselves unable to cope, fell into negative equity and handed back their keys.
 
3.    The fear of being made redundant

Property is a long term investment but planning for the long term appears to be a thing of the past for the normal person in the street, as even longstanding high street companies have hit the wall in recent months. Companies are constantly cutting back the hours, the wages, and the personnel necessary to conduct their businesses as demand contracts. Yes, there may be the grass shoots of a new growing economy but economists predict that growth – even in developing countries will never reach the dizzy heights of even 4% or 5% per annum in the foreseeable future.

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