Shelter? or Investment?

It is quite true that man lives by bread alone — when there is no bread. But what happens to man’s desires when there is plenty of bread and when his belly is chronically filled?

Abraham Maslow

Back in the 1940s, psychologist Abraham Maslow postulated a hierarchy of human needs. His argument was refined over the next 30 years, but essentially can be boiled down to the idea that basic physiological needs like shelter and food are physical requirements for human survival. If these requirements are not met, the human body cannot function properly and will ultimately fail. Physiological needs are therefore the most important and should be met first.

It seems to me that in this simple statement we can find some clues to what is happening in the housing market, and by extension in society as a whole.

The finance of housing is predicated on a basic assumption that the house in which we live, from which we gain that basic physiological requirement of shelter, should be treated instead as a speculative resource. By speculative I don’t mean the normal activities of business in building and supplying houses. I mean instead the process by which people are encouraged, almost required, to risk all – food, family and economic security in pursuit of illusory capital accumulation. I say illusory deliberately because vast increases in the capital value of property benefit no one except the mortgage purveyors, property lawyers and estate agents who are parasitic on the housing market. The rest of us cannot realise that increase except by reducing our stake in the market in the form of a smaller house or by moving to a cheaper area. In other words by relinquishing the security the property is supposed to guarantee.

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