In a state of transition

Roger Hollis's picture
Fri, 03/11/2011 - 18:08 -- Roger Hollis

There are many things that make The Economist stand out from the crowd. Selling more than 1.6 million copies a week, the journal is perhaps the world’s most authoritative publication, leading thought and debate across the globe. And despite the name, it is not solely dedicated (thankfully) to matters of economic theory and policy.

But, for me, the best thing about The Economist is that about half of the copies produced every week are sold in North America. I should at this point admit a bias: I was returning this week form Salt Lake City – the search for good snow on which to ski had taken me to Utah – and being able to purchase a copy of The Economist certainly meant that the 15-hour flight went much quicker.

This was a particularly good week to read The Economist, as it featured half a dozen or so article within its special report on property. Of these, it was a piece about renting that particularly caught my eye. ‘Own Goal’ took a look at attitudes towards renting and home ownership in the USA, but many of the lessons can be applied directly to the UK market as well. The article stated that America’s home-ownership had fallen to 66.5% from its 2004 peal of 69.2% (similar figures to the UK), and compared this to the 46% equivalent rate in Germany. I’ve written before about whether these figures represent a permanent move towards a renting culture, but was unable (like the article) to draw firm conclusions.

So what piqued my interest more was the statistic from Camden Property Trust, an American REIT specialising in multi-family residential blocks, regarding ‘move-out rates’. Broadly speaking, the move-out rate is the percentage of Camden’s tenants that move out every year to buy their own home; at the height of the boom, this was nearly one-in-four, but has now slumped to just 10%.

On the assumption that American the number of people entering the accommodation market every year (ie: people leaving home) is broadly stable, the falling move-out rate points to a prolonged increased in the number of people needing to rent rather than buy. It’s safe to assume that the pattern, if not the exact data, is mirrored in the UK.

This, in turn, points to an increased number of people occupying a ‘state of transition’. It is for these people that furniture rental works best, allowing them to fit their furniture to the exact requirements of their lives at that time. To commit to buying furniture makes little sense and allows for zero flexibility; for these people in transition, furniture rental is not just ideal but essential.

To read the article from The Economist, please go to: http://www.economist.com/node/18254291