COVID has impacted a lot of things for the worse and, depending on where you sit, that includes property prices.
In some parts of the country, the value of property climbed by $1000 per day, pushing the dream of homeownership further and further from the grasp of many who are yet to get on the property ladder.
With international holidays off the cards, those with dough have been investing heavily in property during the pandemic, snapping up homes with almost guaranteed returns in the long run.
The inaccessibility of housing is nothing new, and the government isn’t doing a whole lot to change that fact, but it has certainly been turbocharged by the pandemic. Because of this, many millennials are increasingly resigning themselves to the fact that renting for life is likely to be their only option.
While many are frustrated by the trend, others are embracing the new model of what success looks like in the 21st century.
Welcome to the future of renting for life.
Renting vs Buying
Without going too far down the wormhole of communist philosophy, renting sucks. It separates individuals from the means of home ownership by denying them the ability to save for a property of their own. While tenants work, landlords collect, in all likelihood having the mortgage paid off by those who actually produce things.
After X number of years, the landlord will have a fully paid off property while the tenant has nothing to show for it, further entrenching inequality and perpetuating cycles of poverty and insecurity.
At least, that’s the surface-level take on renting that dominates left-wing social media and it’s fair to say that the internet has no love for buy-to-let landlords.
Owning a home in the capital cities means forking over some of the most eye-watering prices on the planet. Mortages, like rent, tie an owner into years, if not decades, of payments, with the threat of foreclosure, debt, and asset seizure if those payments are not kept up with.
Landlords, too, have to pay for the upkeep of the property. If your dishwasher breaks, or a pipe bursts, or you lose your home in a fire, you have to deal with the financial fall-out of that and it can be extremely expensive.
Of course, owning a property means eventually having an asset that will (almost certainly) appreciate in value while renting for life gives you little in the way of privacy, security, or investment potential.
Still, renters may actually come out on top. With massive upfront costs associated with home ownership, the accounting firm EY found that, over 10 years, renters in certain wealthy suburbs came out $600,000 better off than homeowners.
On top of that, they were able to invest money saved which netted greater returns than the value of property.
A New Paradigm for Success
In the typical 1950s-style approach to success, a job led to a steady income (many times the relative value of today’s salaries), which allowed for home ownership, two cars, a dog, two and a half children, and a white picket fence.
If you didn’t have the above, it was because you didn’t work hard enough and you were deemed a failure. Or a hippy. Or a communist.
While some still grapple with this outdated notion of what living a successful life in the 21st century looks like, others are embracing (or accepting) the reality of the housing market and deciding to lean into the rent for life idea.
In Germany, for example, the majority of people simply rent their homes, preferring that model over outright purchasing.
While this is partially the result of post-war political history, the country also has very strong rental protections that favour renters. Rent cannot be increased by more than 15% over a three-year period, bond is paid in installments, and the government does not lavish benefits on homeowners like our own government does.
This means that Germans pay about the same to rent as to buy a property, without being tied down to a physical location. The freedom that comes with renting means that you can live in some of the wealthiest areas of the country without having to buy in at an exorbitant rate, something homeowners can only dream of.
Indeed, many young people are using the freedom afforded to them (or forced on them, depending how you look at it) to do many of the things that the homeowner generation never could.
With the future of the world in an uncertain state, the value millennials put on experiences over things is growing. Many are opting to travel, go to festivals, and live in other countries over the probably futile market-imposed austerity that is required to own a property.
Success no longer looks like what it once did, and property and material possessions no longer define what it means to have a successful life in the 21st century.
While much of this shift is defined by the parameters of the market, it’s also not one that sees the younger generation living less fulfilled lives either. Science has shown that spending money on experiences, rather than things, will make you happier in the long run.
While homeownership is still upheld by many as the ultimate goal, that perspective is rapidly changing. Those who have no choice but to rent for life are less upset about it than the idea might suggest.