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

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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