Home ownership is falling globally. Findings from Swinton Insurance reveal that 22 of the world’s 36 developed countries have experienced a significant decrease in home ownership levels over the past decade.
And it’s the UK and Ireland that have experienced the steepest decrease of all with an 11% drop in home ownership. In 2008, 76% of people owned their own homes; today it is just 65%, with the remaining 35% renting their home.
The UK isn’t alone in seeing a significant decrease; Denmark and Iceland have seen home ownership fall by 9%, and Slovenia by 7%. Only three countries have seen an increase in the past ten years with home ownership rates rising: Australia (86%), Poland (35%) and Japan (24%).
One sq metre of home for two month’s salary
Swinton analysed ten years of global home ownership and rental data, to see how it correlates with the average cost of renting and buying a home, and average salaries.
The research uncovered a key trend; most countries see a similar ratio of salary needed to the cost of price per square metre of home. Unsurprisingly, wage levels are a key influencer in deciding whether to rent or buy wherever you live in the world.
In the Czech Republic, it costs three times the average monthly salary of £872 to buy one square metre and in France it’s 2.7 times the monthly salary of £1,711 to buy one square metre at £4,651. The average cost to buy one square metre of home in the UK is £3,585, which is equivalent to two months of the average monthly salary of £1,825.
Personal preferences can determine home ownership
The data revealed that for those who rent, one month’s wages is approximately twice the cost of a month’s rent. Those living in Greece and Switzerland have the best salary to rent ratio, with low rent costs in Greece at approximately £345 per month and a high average salary of £4,253 in Switzerland. In fact, the salary to rent ratio in Switzerland could be the reason that only 42.5% of people have chosen home ownership. When compared to the average price to rent of £877 per month in the UK, it is easy to see why ‘generation rent’ is increasing and home ownership is falling.
Angela Bowden, home insurance specialist at Swinton Home Insurance, said: “It’s interesting to see that home ownership rates have dropped in developed countries globally. Our research shows that there are other factors at play other than just affordability – using the example of Switzerland, where salaries are so high, but the home ownership rate is very low – indicating that the cost of living and even personal preferences can dictate whether people become homeowners or not.”
UK rental rate expected to increase
The UK’s current rental rate is expected to overtake the home ownership rate by 2039. With the Office for National Statistics reporting that houses now cost nearly eight times the average earnings of approximately £29,000, and the challenge of raising the large sums needed for a mortgage deposit is beyond many, it is easy to see why renting is on the increase.
But while generation rent is increasing globally, 56% of people in the UK still want to buy their own home to give them a sense of security. If you can save the deposit, it is still cheaper to buy than to rent in the UK, according to a recent study by Santander Mortgages which showed that buying a home could save you over £2,000 per year.
