Recently, an article from nltimes.nl states that the Dutch homeowners are wealthier than the tenants, and somehow implies that owning a house is a bad thing overall. This might be part of the new "you'll own nothing, and you'll be happy" kind of socialistic crap, not sure at this point. Or a teaser for more taxation. But let's talk about this article a little bit.
At this point (2021-2022), buying a house in the Netherlands is pure stress, from the price point of view (average price is now 419.000 euros), from the availability point of view (hard to find, sells way to fast, no much choice left), and from the process in itself point of view (overbidding by 50-80k could be the norm).
I put here some more thoughts about the current situation on the real estate market. But let's dig a little bit into the article and see what's wrong with it:
On average, homeowners have a much greater wealth than tenants, and that difference increased in recent years. Researchers from Statistics Netherlands (CBS) came to this conclusion after disregarding homeowners' houses and associated mortgage debt as a form of capital in their calculations
Generally speaking, this is true, but CBS doesn't say how much in the past they're going with this analysis. And that matters. For example, if you bought a house with a value of €150.000 seven years ago, and that house is worth (according to the WOZ number) €350.000, that means your wealth increased by a nice number of €200.000. But if you bought a house two years ago, the jump is not that big anymore (since the house was already way too expensive to start with) - could be around 50-70k.
But even so, this so called wealth means nothing good: it's used as base for a lot of taxes, so you'll end up paying more every year. The only situation when this matters, is when you sell the house (at peak value), get rid of the debt and cash in the difference. The trick is to move somewhere outside NL (to a cheaper country), but that's not a common case. The common case is that most houses bought by individuals are used as family living spaces, and therefore are not generating any income.
I'm assuming that the statistics took into consideration even houses bought 30-40 years ago with a 1/X of the current price. And if we combine this with the tenants, that given the current situation might not qualify for a 400-500k mortgage even with two salaries, we see why the difference is so big. And also why it's irrelevant, since we're comparing apples with nuts.
Households with their own home had an average net worth of 36,300 euros last year. That is fourteen times higher than the assets of the average tenant, which was 2,600 euros.
The difference for the households is given by the inflated real estate bubble, it's not real. And it's an increase what you cannot cash in, unless you downgrade your housing requirements and at some extent the city (like moving out of Amsterdam to somewhere in the North). Even so, it's partially since everywhere the prices are skyrocketing in the same way all over the country.
Now, I understand that a tenant might not have plenty of assets, especially if they're aged 20 or 22. But they might be as well having 30k euros in the bank and still unable at the current prices to buy anything. Or maybe they are waiting now for the whole market to crash and the prices to come back down in order to buy.
Since the comparison is between a full paid house that has an inflated value and a tenant without assets, the difference seems huge. But it's not quite the right comparison anymore.
Unlike tenants, homeowners saw their financial assets rise. This concerns bank and savings balances, shares, and bonds. Homeowners also more often had another source of capital, such as their own business.
Like everywhere in the world, the assets are really pumped up by the crazy money printing coming from the central banks (FED, ECB, BOJ, BOE, you name it). And that includes real estate. But the first sentence is fake, since you don't have to be a homeowner to have financial assets! As a tenant you might have bitcoins, shares in gold mining, Tesla shares, T-bills or whatever financial instruments. Somehow the paragraph implies that the tenants are poor people, compared to the rich homeowners. I mean, you have to have your own business these days in order to be able to buy a house.
Young people up to 25 and older people over 75 years old relatively often live in a rented house. On average, the elderly have a greater wealth than young people, logically, because wealth is built up over the years. There are significant differences between tenants and homeowners among people of the same age. Younger homeowners also often have more assets than older tenants.
A lot of mix here. Again, having more assets is not related to owning a house or not. Obviously, having assets means that you're financially more agile than the rest, and you might buy a house easier that a tenant that has a low income to start with. But that's not quite news, isn't it?
And I guess it's normal for people under 25 to rent a place. They move more often, they don't quite have a family (with kids) at this point (or in most cases) and their income is low. The problem arises when this category of people are actually qualifying for a mortgage so easily like in the past years.
So, some conclusions:
- owning a house is the perfect normal thing to do. In a reasonably sound market, with normal interest rates and down payments, with calculated risks when applying for a mortgage, the accessibility improves, since the prices will be lower than in a overly inflated market, with billions of €/$ pumped down the drain.
- not owning a house is another normal thing to do. Some people don't want to be bothered with ownership costs, or they want to be more flexible in moving around, especially if they're younger. The problem starts when you discover that renting a place is more expensive than paying a monthly mortgage rate.
- owning an overvalued house makes you rich on paper. For older people this is not an advantage at all, since they don't want to move out of that house, but they will be hit constantly with increased taxes based on the new evaluation.
- financial assets can be owned by anyone that could afford them. It's not about tenants versus home owners. Being poor sucks in both cases.
- all the statistics are based on people that already payed their debt. But more of the recently sold houses are probably mortgages (fully or partially) so it will be interesting to see how much of the population is in debt currently and how much is debt-free.
- most of the market distortion at this point is a follow up of state interventions and insanely printing of money out of the thin air from the central banks. It's not tenants versus homeowners, it's insanity versus normality. And the fix won't be a nice one, when the bubble pops.
