The wealth of real estate…

In the United States, homeownership has long been viewed as a primary way to build wealth, offering stability, financial appreciation, and even tax incentives. Yet, across the world, the cultural and economic factors surrounding homeownership vary significantly. I have a passion for helping people invest in themselves and their future with their real estate decisions and investments and I would hate to see this wealth building and home-safe-space-creating tool stop being a part of the American Dream.

A lot of other countries prioritize renting over owning a home, mostly because it’s so expensive to do so. In these cases, the wealthy population that own homes continue to build wealth and everyone else stays status quo while paying their landlords to live in a home. Every person needs a place to live and there is a time and place to rent, but long term it doesn’t pay off in the states. If you are going to live in a home for more than a few years, you are more likely going to make money owning a home than paying for your landlord’s mortgage and taxes.

While I am an expert at real estate in my local market, I am not an expert in international real estate, so I went to the AI world for help in explaining the differences in real estate in the United Sates versus other countries.

1. The American Dream: Why Homeownership is Key in the U.S.

In the U.S., homeownership is deeply embedded in the cultural concept of the “American Dream.” Owning a home symbolizes independence, financial stability, and success, making it highly desirable. The U.S. government encourages this through incentives such as the mortgage interest deduction, making mortgages more affordable and appealing. Additionally, U.S. real estate typically appreciates over time, with home values increasing due to high demand, population growth, and inflation, providing homeowners with equity they can leverage.

In contrast, other countries often prioritize renting or view property as a less accessible or strategic financial asset. For example:

• Germany and Switzerland: These countries have a robust renting culture, and long-term renting is often more affordable and stable due to regulations that protect tenants and keep rents consistent.

• Japan: Japanese real estate typically depreciates due to an abundance of land, aging infrastructure, and a shrinking population. As a result, many Japanese view property ownership more as a utility than an investment.

2. High Leverage and Low-Interest Mortgages

U.S. homebuyers often use high-leverage mortgages, meaning they can purchase property with a small down payment, often as low as 3–5%. This makes it easier for people to enter the market and benefit from property appreciation, leading to greater potential wealth over time. Fixed-rate mortgages are also popular in the U.S., enabling predictable payments and making it easier for homeowners to budget and build equity.

In contrast, in countries like Canada and the U.K., mortgage terms and interest rates can be more volatile. Many mortgages in these countries have variable rates or shorter-term fixed-rate periods, which can lead to unpredictable monthly payments. This setup limits long-term wealth-building potential through homeownership, as homeowners must account for fluctuating housing costs.

3. Tax Incentives that Favor U.S. Homeownership

In the U.S., tax incentives such as the mortgage interest deduction, capital gains exclusions, and property tax deductions make homeownership more attractive. Homeowners who itemize deductions can save thousands of dollars on taxes, and when they sell a primary residence, they can often exclude a large portion of the capital gains from taxation. This policy encourages people to buy and hold real estate as an investment for future wealth.

Most other countries don’t offer comparable tax breaks for homeowners. For example:

• Australia: There is no mortgage interest deduction, and homeowners primarily benefit from the appreciation of property values.

• France: There are capital gains taxes on real estate, and homeowners typically don’t receive the same level of tax incentives as in the U.S.

4. Cultural Attitudes Towards Property Ownership and Wealth-Building

Different cultural attitudes also shape the view of homeownership. In the U.S., there is a strong inclination toward owning property as a means to wealth. In other countries, investment portfolios are more diverse, and wealth-building may lean more toward savings, pensions, and other investment vehicles, rather than relying solely on real estate.

For example:

• Switzerland: People tend to invest in stocks and pension funds rather than property. Renting is so ingrained that more than half of Swiss residents rent their homes.

• China: Homeownership is high, but it’s driven by cultural and family expectations rather than a desire to build wealth, and government policies also promote this trend.

5. Risks and Limitations of U.S. Homeownership as a Wealth Strategy

While the U.S. homeownership model can build wealth, it's not without risks. Housing bubbles, market volatility, and high debt levels can make homeownership a precarious investment. The 2008 housing crisis revealed these vulnerabilities, as homeowners with high mortgage leverage faced massive losses when property values plummeted.

In other countries, these risks are mitigated by either a more stable rental market or government policies that limit over-leveraging and speculative property buying. For example, countries like Singapore and Hong Kong place strict limits on property speculation, making the housing market more stable but limiting rapid wealth-building opportunities through homeownership.

Conclusion: Homeownership as an Investment — American Reality vs. Global Perspectives

In the U.S., homeownership remains one of the most accessible and culturally encouraged paths to wealth. It is supported by policies and practices that make it relatively affordable to buy property and realize returns over time. However, this model is not universal. Other countries may prioritize renting, favor different wealth-building methods, or regulate real estate markets in ways that prevent speculative growth.

Understanding these global perspectives can shed light on alternative ways to approach wealth-building, reminding Americans that, while homeownership is beneficial, diversification and other financial strategies should also play a role in a balanced approach to financial stability and growth.

What do you think?