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27.10.15

The psychology behind why we buy homes

According to the famous Maslow Hierarchy of Needs our most basic needs are physiological – food, water, sleep – but the next strata of needs is safety. We are pre-programmed to want security, even above love from our friends and family – hence our desire to find roots and stay in one location. The nomadic lifestyle is not one that many of us aspire towards, which is perhaps why so many of us aim to purchase our own home.

Physically owning our own property is one of the proudest moments of many people’s lives. Not only is it a source of pride that you’ve managed to physically find an ideal property through an online estate agent such as www.HouseSimple.com, and also organise your finances and credit rating to a point where you can be trusted by an outside body to pay for it, but it’s also exciting.

In the Great British Bucket List published last year, numbers two and three of the ‘must do’ experiences that British people want to achieve in their lives were learning a new language and visiting the Maldives. Perhaps more tellingly, at number four was ‘buy a house’, and number one was ‘have a holiday home abroad’. It seems that even the most adventurous, free spirited of us prioritise having a base (or two) above climbing mountains and backpacking around Europe.

Clearly we need a protection from the cold and elements, but why then do we want to buy? Why are we not satisfied with just renting? Well, owning a home gives one pride but also stability. A landlord could decide to sell up at any moment and eject his tenants.

And humans, according to cognitive psychologists Amos Tversky and Daniel Kahneman, are motivated to avoid losing money far more than actually gaining it.
A person who avoids losing £100 will, according to the duo, feel twice as good as a person who gains £100. The Loss Aversion theory is based on what is known as the endowment effect – people place a higher value on what they own than an identical item that they do not.

That surely applies to a house, and the duo would no doubt argue then that the person whose money is being lost – ie disappearing into a landlord’s pockets – will have feelings of unhappiness that are stronger than the feelings of happiness that a person feels when they are working towards ownership. Simply put, we are desperate to avoid losing money more than we are to gain a home. Avoiding loss is better than making gains.

The UK is a nation of homeowners. The perceived housing crisis - not enough homes for too many people – is big box office for newspapers and broadcasters.
We are told that owning a home is good and something we should aspire towards.

It’s why housing is such a big issue in politics and economics in the UK, and has been for decades as the country rebuilt itself after World War II. Meanwhile, in Germany, home ownership is less important, because fewer people actually own homes (just over 40%). Again, the reasons are historical and largely stem from the middle of the 20th Century, when the country’s housing policy benefitted those who rented, more than it does here.

In conclusion, these several factors combine to push us toward home ownership. We are told by the media that it is good, we want stability and need safety, we want to prove that we are grown up, and we hate throwing money away more than we like gaining it.