Aidan Crawley/Bloomberg

If It’s Stability You Want, Then Rent, Don’t Buy

New research by the ECB shows just how bad for financial stability possessing your own home can be
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Anyone who got caught in the real estate bust last decade in the U.S. or U.K. probably knows this already, but now the economic data is in: home ownership can be bad for you.

More accurately, it can be harmful to the financial stability of whole economies. That’s the evidence from a new study published this week by European Central Bank research economist Gerhard Ruenstler.

The higher the level of ownership in a given country, the longer and bigger the credit cycles are. And this can make a big difference — look at the chart for Britain, where house prices are the subject of every Londoner’s Sunday brunch chatter. With a rate of 72 percent, higher even than the U.S., the last four decades have seen three matching mega-cycles in credit volumes and house prices. 

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