It’s a long held belief (even a truism) that home ownership in Australia and happiness go hand-in-hand. After all, owning your own home can provide some real benefits like financial security, wealth creation, rent-free living (once your mortgage is paid off), tax free capital gains (which can form the basis of a retirement nest egg) or an inheritance for your kids.
Of course it’s not just about the financial benefits. There are emotional ones as well including pride in ownership, a sense of achievement, feeling safe and secure and having a place to raise a family. Many argue (especially those with a vested interest in residential property) that taken as a whole, these benefits lay the foundation for a happy and joyful life.
But in light of the recent GFC and the current challenging economic and social environment does home ownership really provide the happiness we expect it will?
Part of the answer lies in how each of us defines happiness. And here I’m sure there will be different views, as one person’s happiness may not be that of another’s. The Collins dictionary describes “happy” as “feeling, showing or expressing joy; pleased”. I wonder how many homeowners who are struggling to keep up mortgage repayments, not to mention the day to day costs of living, are really happy at the moment. They could be feeling as much pain and unhappiness as they are happiness, especially if they’re living with the threat, even if it’s remote, that they might have to sell to extricate themselves from a difficult financial situation, or worse, that they face repossession.
The other thing to consider is whether home ownership positively affects things like social interaction with family, friends and neighbours, leisure activity, general health and participation in community activities. All these things can lead to a happier sense of being but in the absence of hard data it is difficult to know, all things being equal, whether home ownership really makes any difference. That is, whether it makes any of these things better or worse, when compared to say, renters.
I remember when my wife and I first started out together. We rented a cheap two bedroom flat in an inner Melbourne suburb and we have nothing but fond memories of that time. The fact that we didn’t own a home mattered little. Eventually we started saving for one which meant there wasn’t much money to spend. But even though we were broke we still had a great time – we were happy.
Now that we have a family and are owners and not renters, are we any happier now than we were all those years ago? I’d say our level of happiness is pretty much the same (although our lives have certainly changed). I must however, confess to feeling happy about the fact we now own our home mortgage free. Interestingly, I think this feeling of happiness is more about the financial freedom that being mortgage free brings rather than about owning residential property.
It’s also worth considering today’s renters who either can’t or choose not to become homeowners. Often maligned (because many believe they are throwing their hard earned cash away in rent), are they less happy just because they don’t own a home? While many could be disappointed and frustrated because they face significant barriers to entering the property market, this in itself should not be taken as a sign of sustained unhappiness. Remember, renting does have some benefits like no home loan debt, greater flexibility, less risk, no repair costs and it is often cheaper than owning. And let’s not forget renters may become homeowners in the future if they so choose or when their finances or the property market permits.
So back to the original question – does home ownership make you happy? On balance I would say that home ownership in itself is not the panacea of happiness. It is a means to an end. It can help lay the foundation for happiness but it can also work the other way if things go wrong. It would be unwise to believe that owning a home is the be-all and end-all to a happy life. There are much more important determinants of happiness which have nothing to do with bricks and mortar.
Peter Boehm's first book, The Great Australian Dream: A Guide to Buying Your First Home , is available online and at all good bookstores. It discusses the numerous challenges Australians face in entering the property market as owner occupiers and investors and provides straightforward advice, hints and tips on getting past them.