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Home-buying around the world

About the author

Alina Dizik is a freelance journalist who covers consumer trends, careers, lifestyle and small business for national publications. Her work appears in the Wall Street Journal, Entrepreneur, Men's Journal and BBC.

  • Home-buying around the world

    For most families, purchasing a home is the most expensive financial decision they’ll make in their lifetime. But what it takes to own your home — and the importance of home ownership varies around the world.

    For instance, in Switzerland, only about a third of the people own homes and those who do only make the purchase once they can comfortably afford it. For the Swiss, owning a home isn’t nearly as important as having disposable income to travel or dine out. There is little social stigma associated with long-term renting.

    Meanwhile, in places like Singapore and the United States, home ownership is widely encouraged and often seen as marker of success.

    "In the US, we are still telling people that everybody should own a house," said Ken Johnson, faculty director of the Master of Science in International Real Estate program at Florida International University in Miami. “There are clearly different cultural positions towards ownership,” he said.

    Here is a look at cultural norms and what it takes to purchase a home in four major metropolises.

    (iStockphoto)

  • Moscow, Russia

    Price per square foot: 79,383RUB ($2,400)

    Prospective home buyers face plenty of hurdles when it comes to owning some of the world’s priciest real estate (compared in price only to London, Tokyo and New York). Even after Russia’s 2008 residential real estate bubble burst and home prices declined by at least 30%, Moscow’s housing stock is extremely limited. It is also in poor condition and requires major repairs for home-buyers. Title disputes are common.

    Multimillion dollar luxury properties, sought out by the city’s growing upper class, are in constant demand with luxury two bedroom apartments costing upwards of 66,152,879RUB ($2 million) on average. The majority of Moscow’s middle class and working class own small apartments or live in government-owned housing. Overall, fewer than 65% of people own their own home in Russia, which includes housing that was automatically privatized during the 1990s.

    Many people who don’t already own, aren’t interested, said Johnson. That is partly because Russians still, in large part, view housing as a good to be consumed, not as an investment. Like some other Eastern Europeans, Russians tend to see ownership as an added expense, he said.

    Most people pay cash; fewer than 20% of buyers hold mortgages. A fee of about 5% is paid to handle the legal work. Those who own a property for more than three years are exempt from taxes.

    Olesya Akimtseva, 31, a lawyer who lives in Moscow with her husband, said buying their new construction three-room flat (which includes a living room and two bedrooms) was a “big achievement.”

    Similar flats can cost upwards of 2,3153,507RUB ($700,000). Buying new was the most convenient option, because the couple wasn’t faced with repairs. While she and her husband saved to buy their apartment, Akimtseva said many of their friends get financial help from their parents to make a purchase.

    (Maxim Marmur/Getty Images)

  • Paris, France

    Price per square foot: 2,036 euro ($2,600)

    Living in Paris is a dream for many, but contending with the short supply of 150-year-old flats for sale can be difficult. Most residents of the cities are prepared to live in small vintage digs. New construction within the city limits is rare, said Bertrand Crissin, director of Paris Attitude, a Paris-based apartment rental company.

    “Each square meter is precious,” Crissin said.

    City dwellers live with vintage parquet, fireplace and original mouldings, but often remodel kitchens and bathrooms, says Crissin who lives in a two bedroom in Levallois-Perret, just outside the city, with his family.

    “When I bought it, it was already too small. I have two children and two bedrooms,” he said.

    Owning is a point of pride to Parisians — and only about half of the city’s dwellers own their flats. Culturally, ownership is encouraged because “it contributes to a level of social stability,” Crissin said. Real estate agents still don’t have a centralized database from which to find properties for sale, so even finding out what’s on the market is difficult, he added.

    In France overall, more than 50% of people own, but demand for home ownership is declining as the country struggles with an economic slowdown. Financing is available, with mortgage rates below 3.5%, and down payments of 10% are common. Costs associated with the purchase, including taxes, make up 7% of the final price for buyers.

    Last year, the government began to impose an additional capital gains tax on foreign-owned secondary residences, in part to increase supply for residents.

    (Patrick Kovarik/Getty Images)

  • Chicago, United States

    Price per square foot: $205

    It took Anna Markel Vaysman and her husband two years to find the ideal suburban Chicago home with plenty of space. The couple, who have two-year-old twins and are expecting their third child, bought a five-bedroom home, with a spacious yard. Similar homes in the neighbourhood sell for upwards of $600,000.

    “It does feel like a good accomplishment to purchase the property,” said the 31-year-old pharmacist. “It signifies that we have been working towards something.”

    Real estate ownership remains a central tenet to achieving the American dream, especially in areas of the Midwest that have become a bargain for post-recession home buyers. As Americans emerge from a housing price bust and financial crisis that began more than five years ago, more people are opting to rent, but the preference toward ownership is still culturally ingrained into society, said Johnson.

    The current home ownership rate in the US sits at 65%, the lowest figure in 18 years. In 2004, 69% of Americans owned a home.

    Transactional expenses and fees associated with buying add less than 3% to the total cost in much of the country, generally making it easier for people to buy in the US than in some other countries. Many banks now require down payments of about 20 % and current interest rates on loans are below 5% for many buyers.

    Unlike homeowners in many other countries, many Americans generally assume that they will make money when they sell their homes — they expect a home to appreciate significantly in the long-term. Even the real estate bust — which was preceded by sharp price increases — has done little to sway ingrained attitudes on ownership and moneymaking, Johnson said.

    (Karen Bleier/Getty Images)

  • Singapore

    Price per square foot: 1,792 SGD ($1,400)

    When Parag Khanna, 35, relocated with his wife and two young children to Singapore last year, he purchased a 4,000 square foot new construction home, something that would likely never come on the market in New York, where he had lived previously.

    “We joke that it’s the Asian dream,” said Khanna, a senior research fellow at the New America Foundation, a think tank.

    Khanna lives in a modern neighbourhood filled with tightly packed homes, many worth more than 3,840,600SGD ($3 million). “It’s not a suburban home with a white picket fence,” he says of the four-story terrace home that is attached to an identical one. “It’s vertical and narrow.”

    Other residents live in high-rise flats, a near necessity because of the country’s density. More than 5 million people live in just 272 square miles — New York City’s five boroughs, by contrast, comprise about 303 square miles and are home to more than 8.3 million people. About a quarter of Singaporeans live in so-called shoebox homes that are less than 550 square feet.

    Even so, the tiny city-state has the highest rate of ownership — 93% — in the world. Most citizens are guaranteed a form of housing, arranged by Singapore’s Housing and Development Board. Foreigners, along with corporations, will pay an extra tax beginning this year — a duty designed to prevent out of control price increases.

    Singaporeans also have the lowest mortgage interest rates in Asia (many borrowers pay less than 1% interest) and repayment options are flexible. Property taxes are progressive and vary from 4% to 16% annually, depending on a home’s value.

    Most residents view home ownership as a savings vehicle.

    “It’s like a bank account,” Johnson said, adding that in many Asian countries, including Singapore, ownership is a way to be integrated into society.

    (Roslan Ragman/Getty Images)