Global Consumer Attitudes to Home Ownership: In Search of a Room of One’s Own

April 2015

Housing (shelter) is a fundamental human need, but its supply poses complex challenges. The manner in which these challenges are dealt with by markets and governments varies widely around the world, and these variations can have a profound impact on consumer behaviour across a range of other goods and services markets. The relationship between the residential housing market and consumer demand is particularly marked in countries where housing equity is an important component of household wealt

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Household size shrinks and demand for homes grows

Globally, household size is shrinking. Young adults are now living alone for longer, people are having fewer children, life expectancy is rising and divorce rates are rising; all driving demand for single occupancy dwellings.

Home as piggy bank

The “feel good” factor associated with rising home values is rooted in the fact that a home is an asset. For many, their mortgage is their main savings vehicle. As a result, housing values and consumption expenditure have become increasingly intertwined in some markets.

As a result of structural changes caused by the globalisation of economic activity and the liberalisation of labour markets, upward pressure on wage rates remains very weak across much of the developed world. This increases the importance of housing equity as a determinant of consumer expenditure.

Renting is for losers

In the United Kingdom and some countries, renters are commonly regarded as being socially inferior to owner occupiers. Many governments regard home ownership as an important policy goal. As a result, they incentivise it by making mortgage interest payments a deductible expense for the purposes of income tax.

While, there is evidence to suggest that housing market crashes and attitudes towards home ownership may be changing, especially among young adults, the likelihood is that millennials are merely delaying home ownership, rather than turning their backs on it.

A greying population

With fertility rates below replacement levels in many countries, population ageing is set to accelerate. This will have a long-term impact on the nature of demand for housing and on associated markets.

A new type of foreign buyer

The emerging market economic boom has engendered a class of super-affluent consumers who want a second home abroad. This is influencing property markets in such cities as London, New York and Singapore.

In addition, markets with large migrant populations, remittance inflows is driving housing demand; economic conditions in the US are an important determinant of housing demand in Mexico.

The next wave of urban migration will be African

During the 21st century to date, rapid urbanisation has been largely an Asian phenomenon, but in the decades to come, the locus of the urbanisation trend is set to shift to sub-Saharan Africa.

However migration from rural to urban areas is still a significant driver of housing demand globally, particularly in emerging Asia Pacific and the Middle East, where the youthfulness of the population is putting acute pressure on housing supply.

Can India be the new China?

With the Chinese housing market now slowing, India may be poised to take its place as the main driver of global sales growth in a variety of housing-related markets, such as kitchen appliances and home furnishings.

Going green

Home owners are likely to increase their investment in green technology, such as solar panels, over the coming years, reducing their utility bills and boosting their discretionary income. Meanwhile, emerging technologies such as 3D printing may reduce construction costs, making housing more affordable.

EXECUTIVE SUMMARY

Demand factors
Consumer market trends
Key market trends
Outlook
Summary 1 Consumer Attitudes to Home Ownership: Opportunities and Challenges

DEMAND FACTORS

Shrinking Household Size Boosts Demand for Housing
Table 1 Average Age of Men at First Marriage – Selected Countries 2000/2014 Table 2 Average Age of Women at First Marriage – Selected Countries 2000/2014 20-somethings increasingly put family life on hold Chart 1 Average Age of Women at First Childbirth – Selected Countries 2000/2014 Fertility rates have also been falling Table 3 Fertility Rates – Selected Countries 2000/2014 More divorcees and retirees Chart 2 Growth in Population and Number of Households – Selected Countries 2000/2014 Stuck in the nest
Youthful Populations Put Pressure on Middle Eastern Housing Supply
Young Saudis “stuck in their parents’ homes” Mortgage market remains stunted Chart 3 Gross Mortgage Lending – Jordan, Kuwait and Saudi Arabia 2009-2014
Tales of the City
Chart 4 Urban Population in China, India, Indonesia and Japan 2009/2014 Chart 5 Urbanisation in China, India, Indonesia and Japan 2009/2014 Table 4 Rural Population in China, India, Indonesia and Japan 2009/2014 Table 5 Population Growth – China’s Four Largest Cities 2009/2014 Overcrowding pushes up rents Population pressure in surprising places
House Prices are Headline News
In search of the “feel good factor” The great stagnation Chart 6 Consumer Expenditure on Housing as a Proportion of Overall Consumer Expenditure in Selected Countries 1999/2009/2014 Table 6 Consumer Expenditure on Housing as a Proportion of Overall Consumer Expenditure by Region 1999/2009/2014 The dream that refused to die Table 7 Age When Consumers Typically Become Home Owners 2015 – Emerging and Developed Markets
The Tricky, and Sticky Economics of Housing
Chart 7 Gross Mortgage Lending – Germany and Spain 2004-2014 Chart 8 House Price Indices – Germany and Spain 2007-2014 Financial engineering backfires The stickiness problem Table 8 Housing Completions – Ireland and Spain 2000-2014 Chart 9 House Price Index – Ireland 2000-2014 Chart 10 Housing Completions – Germany, Spain and the UK 2000/2006/2014 Table 9 Population Density – Selected Countries 2014 It’s the inventory stupid! The largest bang of all? Chart 11 Housing Completions – China 2000-2014 Chart 12 House Price Index – China 2003-2013
A Helping Hand from Government
Table 10 Proportion of Households Living in Owner-Occupied Housing – Selected Countries 2014 Table 11 Proportion of Households Living in Owner-Occupied Housing – US and UK 2009-2014 Perceptions of inflation – why housing is different Chart 13 House Price Index – US 2003-2014 Mortgages as a savings vehicle Help to Buy scheme causes controversy in the UK The Green Belt becomes a planning battleground Insiders versus outsiders Build up or out?
Is Rent Really “Dead” Money?
Table 12 Perceptions of Renting 2015 – Emerging and Developed Markets The ghost of negative equity Tenancy law is crucial Table 13 Home Ownership as a Priority 2015 – Emerging and Developed Markets Changing attitudes among millennials?
The Rise of Global Cities
Wealthy Russians flock to “Londongrad” And for the somewhat less affluent – Bulgaria Hurray for Hollywood! But some locals lose out Table 14 Availability of Affordable Housing 2015 – Emerging and Developed Markets Some cities fight back against gentrification
Shrinking Home Sizes
Small is beautiful? The value of experience McMansions make a comeback in the US? Chart 14 Households by Number of Rooms in the US 2009-2014
Remittances Flow into Bricks and Mortar
Table 15 Remittance Inflows in Selected Countries 2009/2014 Home is where the heart is Table 16 Real GDP Growth and House Prices in Poland 2008-2013 Irish migrants keeping up mortgage payments at home
Technology and social atomisation drive “super cocooning”
“I think we are looking for protection” Terrorism fears keep affluent Kenyans at home Some millennials opt for communal living Cohousing aims to cross the generational divide

CONSUMER MARKET TRENDS

Home Security a Priority in Insecure Places
Chart 15 Deaths from Assault in Selected Countries 2014 The enemy at the gates Chart 16 Gini Index in Selected Countries 2014 Scepticism in Europe Smart home technology set to disrupt the market?
Consumer Appliance Demand Heavily Dependent on Housing Market
Chart 17 Volume Sales of Major Appliances in the US 2003-2014 Shrinking households and smaller homes mean smaller appliances Demand for air purifiers soars as China urbanises Chart 18 Volume Sales of Air Purifiers in China 2009-2014
Consumer Electronics Sales Boosted by Cocooning
Chart 19 Volume Sales of Tablet Computers, Digital TVs and Smartphones in the US 2008-2013 As TVs get bigger and sharper, “super” cocooning emerges Table 17 Possession of Broadband Internet Enabled Computer in Selected Countries 2009/2014 Chart 20 Annual Cinema Trips in Selected Countries 2009/2014 Pay-TV now regarded as a necessity by many in Ireland Chart 21 Possession of Cable TV or Satellite TV System in the US, Ireland and Spain 2009-2014
Some Do More with Less in the Garden
Growing number of tenants bad news for UK gardening market Chart 22 Gardening Value Sales in Germany and the UK 2008-2013 Gardens shrink as lot sizes contact in Australia Back to basics in Spain In search of clean air in China
Varying attitudes to manual work impact home improvement
Chart 23 Global Value Home Improvement Sales 2008-2013 House prices a key component of demand Chart 24 Consumer Expenditure on Home Improvement and House Price Index in the US 2000-2014 Renters evince a lack of interest in DIY in the UK Every man should build a house Do it for me!
Home Furnishings Sales Sensitive to Shifts in Housing Values
Chart 25 Consumer Expenditure on Home Furnishings and House Price Index in China 2002-2014 Chart 26 Consumer Expenditure on Home Furnishings and House Price Index in the Netherlands 2003-2013 Shrinking home size helps to squeeze demand for furniture in Japan Chart 27 Value Sales of Home Furnishings in Japan 2008-2013 Falling rate of home ownership undermines consumer demand for furniture in the UK Table 18 Households by Tenure in the UK 2009-2014
Equity release bolsters purchasing power
Downsizing as an alternative
Housing Goes Green
Shift to renewables pushes up electricity costs in some countries Chart 28 Per Household Consumer Expenditure on Electricity 2009-2014 Governments push renewables, households reduce electricity consumption Global energy deflation Going off the grid in emerging markets Chart 29 Proportion of Households with Electric Lighting in Selected African Countries 2014 Carrots and sticks

KEY MARKET TRENDS

Brazil
Chart 30 Brazilian House Price Index 2004-2014 Table 19 Brazil’s Housing Stock 2009-2014 Increases in life expectancy and number of divorcees fuel growth in smaller households Chart 31 Households by Number of Persons in Brazil 2009/2014 An underdeveloped mortgage market Chart 32 Households by Tenure in Brazil 2009/2014 Table 20 Real Gross Mortgage Lending in Selected Countries 2009/2014 Bringing favelas in the formal housing market Government promotes home ownership to stimulate economic growth Sales of appliances and home furnishings boom Table 21 Volume Sales of Major Appliances in Brazil 2009-2014 Consumers invest in energy efficiency and green energy Feeling the strain
China
Chart 33 Real GDP Growth in China 2004-2014 Unprecedented urbanisation Table 22 Population of China’s Five Largest Cities 2009/2014 Household size shrinks Chart 34 Households by Number of Persons in China 2000/2014 Surge in Construction Activity and Housing Values Chart 35 Housing Completions in China 2009-2014 Chart 36 Chinese House Price Index 2009-2014 “DIY is for migrant workers” Too much of a good thing? A dangerous intersection of politics and economics Debt worries mount, as the government struggles to reorient the economy Demographics darken the longer term outlook
Germany
Chart 37 Per Capita Mortgage Debt (Outstanding Balance) in Selected Western European Countries 2014 Renting an affordable and stable option Tenants buy their own furniture and appliances Table 23 Value Sales of Gardening and Home Furnishings in Germany 2008-2013 Housing equity relatively unimportant as a demand driver Chart 38 Savings Ratio in Selected Western European Countries 2014 Table 24 Savings Ratio in Germany 1990-2014 Cheap money fuels property investment Chart 39 German House Price Index 2006-2014 In spite of quantitative easing, a housing bubble is unlikely Table 25 Gross Mortgage Lending in Germany 2009-2014
Spain
Housing Pain Lingers Construction binge leaves a nasty hangover Chart 40 House Price Index in Spain 2007-2014 Chart 41 Housing Completions in Spain 2004-2014 A legacy of ghost towns and negative equity Public housing sold off as regional governments struggle to balance the books Staying close to home Chart 42 Share of Young Adults Living with their Parents in Selected Western European Countries 2013 Hard-hit youngsters seek to cut back and consume creatively Housing woes lead to consumption crunch Chart 43 Consumer Expenditure in Spain 2007-2014 Table 26 Value Sales of Gardening and Home Improvement in Spain 2008-2013 Chart 44 Savings Ratio in Spain 2007-2014
UK
Rising Prices Leave “Generation Rent” Stranded Chart 45 Savings Ratio in the UK 2009-2014 Safe as houses? Table 27 Housing Completions in the UK 2009-2014 Government provides a helping hand to first-time buyers Renting is the new normal for many young adults Table 28 Households by Tenure in the UK 2009-2014 Chart 46 Growth in Real Value Sales of Home Furnishings in the UK 2002-2013 Requiem for a dream?
US
Home equity a key factor in US consumer confidence The last refuge of a struggling middle class? Chart 47 Gini Index in Brazil, Thailand and the US 2009-2014 Housing as saving Chart 48 Savings Ratio in the US 1990-2014 Home equity rebounds

OUTLOOK

Cyclical Nature of Housing Market Key to Demand
How will China’s slowdown play out? Chart 49 Growth in Real Value Sales in Selected Chinese Markets 2009-2018 (Actual and Forecast) Chart 50 Growth in Volume Sales of Major Appliances in China and the World 2009-2019 (Actual and Forecast) Table 29 Consumer Expenditure on Household Goods and Services as a Proportion of Overall Consumer Expenditure by Region 2014/2019 Can India be the new China? Chart 51 GDP Growth Forecast for China and India 2014-2019 Table 30 India: House Price Index 2010-2013 Rebound in housing completions in North America and Western Europe Table 31 Housing Completions in North America and Western Europe 2014-2019
House Prices and Consumer Demand May Become Even More Intertwined
Headline unemployment numbers do not tell the whole story UK housing values and consumer confidence increasingly move in lockstep Table 32 UK House Price Growth and Consumer Confidence Index 2012-2014 Chart 52 Consumer Expenditure on Housing as a Proportion of Overall Consumer Expenditure in Selected Countries 2014/2019 Table 33 Consumer Expenditure on Housing as a Proportion of Overall Consumer Expenditure by Region 2014/2019 Can the housing cycle be tamed?
The Next Wave of Urbanisation will be African
Table 34 Growth in the Number of Households by Region 2014-2030 Table 35 Urbanisation in Selected African Countries 2000/2014/2030 Creaking infrastructure could boost e-commerce Rising house prices – a boon for some, a burden for others Shifts in household structure likely to boost consumption Table 36 Kenyan Homes by Number of Rooms 2000/2014 A vertical solution to Africa’s slums?
Ageing Populations Will Have a Profound Impact
Table 37 Median Age of Population in the Oldest Eight Countries 2014/2030 (Actual and Forecast) Table 38 Median Age of Population in Selected Emerging Markets 2014/2030 (Actual and Forecast) As public pensions come under strain, equity release could help to plug the gap Increased migration will mean higher remittances
Generation Rent – Here to Stay or a Passing Fad?
Will Millennials buy into the American dream? The dream that refuses to die Young Britons face the prospect of being lifetime renters
Green Energy and Technology Change to Impact Housing Market
On the cusp of a solar revolution? Greener homes will need less energy Going off grid Time for the iHome?
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