When you buy a house are you making an investment? In a sense, that is a pointless question, and most people would say that of course the answer is yes. It is true that for most of us a house is the largest single expenditure we are likely to incur, and true also that we hope that the value of the house does not drop. To be more precise, we hope that if we have to move — from personal choice or because of other circumstances, such as a change of job — the proceeds of sale of the house will be adequate to cover the cost of the new one. Many of us also hope that when we die, the value of the house will be sufficient to be helpful to our children if we leave it to them in our will.
I am writing this very much from the United Kingdom point of view. In the U.K. it has been customary for many people to own their houses, rather than rent them. That is far less true in several of our European neighbours, and of course it is the case that in the U.K. many people do in fact rent rather than buy (probably because they cannot afford to buy).
If I seem to be making a bit of a meal of this, I am, and I am doing so deliberately. Let me explain, by going back to the question with which I began this article: “When you buy a house, are you making an investment?”
The answer which I gave is entirely accurate, but in my opinion it is not the whole answer, nor indeed the more important part of the answer. The crucial part, surely, is: “We are buying a home.”
That certainly was how my wife and I saw it when we bought our first house; we needed somewhere to live, and we wanted it to be as agreeable as possible.
When I changed my job, and my place of work, we sold the house, and bought another, seeing it as a pleasant place in which to live and not principally as an investment. Another change of job led to another sale and purchase, and finally, in retirement, we sold our house and bought another, smaller, one which suited our needs better as our children had left home.
In my experience, most of the people we know have taken similar decisions for similar reasons, and most have been concerned above all with finding suitable and pleasant places in which to live. Seeing houses as assets from an investment point of view has been very much a secondary consideration.
In recent years in the U.K. an increasing number of people have been finding it very hard to find the money with which to buy their first home. Furthermore, house prices now vary quite dramatically between different parts of the country. This means that job-seekers in the north of England, for example, even if they are willing to move to a place where there are more jobs, cannot afford to do so, because they could not afford the houses in such areas, where their prices are far higher.
It is of course easier to identify the problem than to find an effective solution. As I see it, however, there are some possible solutions. One would be to impose high taxes on owning a “second home”.
Another would be to impose by law a strict limit on the profit that could be made from selling a house, except when the sale is to someone coming to work in the area.
Neither of these measures, I realise, would be at all likely to find favour with the politicians. On one side of the political spectrum, the measures would run counter to the idea that selling things for the largest possible profit is a sine qua non of good practice.
Politicians on the other side of the spectrum would avoid supporting such a fundamentally “new” set of measures, because of the risk that by doing so they would put themselves out on an untenable limb.
All that, I well understand. I am not a politician, and I certainly do not have any realistic advice for those on either side of the spectrum.
I do nevertheless believe that continuing to see houses as primarily investments rather than as primarily homes is fundamentally flawed.
This problem will not be tackled by leaving it to the politicians, but I feel strongly that tackled it should be.