Global House Hunters, and the Australian Homeownership Love Affair

Global House Hunters, and the Australian Homeownership Love Affair

Over the summer I have discovered this new channel , 94 Life. One of the programs on 94 Life , is called “House Hunters International”.

Normally the episodes feature families leaving the developed world (primarily the USA) and heading for significantly cheaper and generally sunnier climes.

However there was a recent episode where a couple from San Diego were packing up and moving to Malmo Sweden. It seemed to be a strange move, moving to a country well-known for it’s bitterly cold winters, and for being very expensive.

Surely Swedish property would cost a fortune? And they’d be lucky to get an Iglo.

However turns out Sweden is a lot like Germany, a country that is relatively strong economically, (relative to other parts of Europe), yet property prices are low, there are rental caps, home ownership is low and property prices don’t seem to rise.

So the question is why is it that Germans and Swedes don’t seem to be embracing the “homeownership dream” that characterizes places like Australia and Britain.

At the end of Second World War both Britain and German were in the same situation, with a huge shortage of homes, yet since that point in time, one country has embraced homeownership, while the other has become a country of renters.

The explanation comes in some seemingly subtle policy differences.

“Britain imposed stringent rent & construction cost caps on developers of public housing. Under those constraints, housing quality suffered. Over time, the difference between publicly and privately financed construction became so glaring that rental housing—which was largely publicly financed—acquired a stigma…. it became housing for poor people.”

Germany similarly had rental controls, however unlike Britain they didn’t squeeze out the private sector, such that today while the German rental market is still robustly regulated, the regulations are very favorable to renters, and the quality of rental properties is very good.

Further as German renters have become a strong political group, rules are likely to remain favourable. For example, German law places caps on rental increases.

All of which leads me to the Sydney rental market. In my opinion, the average Sydney rental property tends to be “tired and in need of work”. And that is putting it politely. Now I am not saying that you can’t get high-end rental properties in Sydney, but you will pay a premium, and don’t be surprised if rents rise pretty steadily.

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