Why Buying a Home is Stupid (*As an Investment)

I’ve got some big news: I'm going to be a dad!

And, I think I'm ready. Well, as ready as anyone can be before the little one arrives. This new chapter has my mind racing, particularly about a question many soon-to-be parents face: Is it time to buy a home?

Don't get me wrong, I love my apartment.

For a city like Tokyo, where living spaces are famously compact, my place is quite nice. I can definitely fit a kid in here somewhere. But there's a nagging thought: I don't own it. Every month, a chunk of my income goes to a landlord. The logic of buying seems unshakeable. Instead of paying rent, I could be paying down a mortgage, building equity, and one day owning an asset outright.

So, I started looking around. Just a 20 or 30-minute train ride from central hubs like Shibuya or Tokyo Station, you can find houses ranging from ¥50 million (around $340,000) for an older place to ¥100 million (around $675,000) for something new and spacious.

This 2-story, 100m2 house around 30 minutes from Shibuya sells for less than $350,000

But when I put on my investor hat, a surprising and frankly, rather sad, realization emerged: From a financial perspective, buying a home is a stupid idea.

In this article, I’m going to tackle the most common arguments for buying a property and see if they hold up to scrutiny:

Myth #1: “Buying a property saves money.”

It sounds so logical, doesn't it? Renting is framed as "throwing money away," while buying is an investment in your own future. You're paying to make yourself richer, not your landlord. This sounds fantastic on paper, but the numbers tell a different story.

Let's look at the price-to-rent ratio in major cities around the world. This ratio tells you how many years of rent it would take to equal the purchase price of a similar property

As you can see, in Tokyo, you'd need to pay rent for a staggering 38 years to match the cost of buying. You might look at New York, where it's "only" 20 years, and think it’s a better deal.

The rental yield (the return from rent) is nearly 6% there, almost double Tokyo's. However, the catch is the mortgage interest rate. In the US, you'd be lucky to get a mortgage under 6%, with rates often climbing to 7% or 8%. Suddenly, the interest payments alone can eclipse any potential rental income, turning your "investment" into a liability.

Myth #2: “When you own, you pay yourself, not the landlord.”

This is true. Each mortgage payment brings you one step closer to full ownership. It’s a powerful feeling. But we conveniently forget the mountain of other costs that come with a property title. A mortgage is just the beginning.

As the graph shows, expenses like maintenance, insurance, and property taxes add up significantly.

And there are two more crucial costs not even pictured here. The first is opportunity cost. When you buy a house, a huge portion of your savings is locked into that single asset. This is money you can't easily access if a better investment opportunity comes along.

The second is the intangible, yet very real, cost to your freedom. What if a dream job opens up in another city or country?

Your house can't move with you. You're now faced with the hassle and expense of selling (aka. real estate agent fees) or becoming a landlord yourself, all while trying to find a new place to live.

If you were renting, you could simply terminate your contract and move on.

Myth #3: “Housing is a safer and better investment than the stock market.”

Okay, so maybe buying a house isn't the simple money-saver it appears to be. But surely, it's a solid, safe investment, right? We all hear stories of people losing their shirts in the stock market, but property feels tangible and secure. Let's debunk this final argument.

First, is housing a safe investment?

The data is clear: over the last three decades, the S&P 500 has delivered more than double the annual return of the US housing market.

"But wait!" you say. "If you own a house, you don't have to pay rent!" That's a huge saving, and it's a fair point. So, let's factor that in.

Imagine two paths starting with a nest egg of $121,500.

Path A (The Buyer): You buy a house for $121,500. Assuming it appreciates at the historical average of 4.5% annually, it'll be worth about $435,000 after 32 years. Great! But remember those hidden costs? A conservative estimate for maintenance, taxes, and insurance is 1.5% of the home's value each year. Over 32 years, that's roughly $126,000 in expenses. Your net gain is a respectable $309,000.

Path B (The Renter/Investor): You invest that same $121,500 into an S&P 500 index fund. At a 10.3% average annual return, your investment grows to an astonishing $2.98 million. Of course, you had to pay rent this whole time. Let's say your total rent over 32 years, adjusted for inflation, comes to $370,000. Even after subtracting that, your final net position is $2.61 million.

The gap is insanely big!

And this isn't just a US phenomenon. Let's look at other markets:

In London, while the housing market has been famously hot, investing in the local stock market would have still left you with more money.

In Stockholm, it's not even a contest: The stock market has generated nearly three times the wealth.

Even in Tokyo, with its historically weak stock market, the recent surge means you would have come out ahead by investing rather than buying.

So, Should You Never Buy a House?

After all this, I hope I've convinced you that buying a property is not the amazing investment it's often made out to be. But that doesn't mean I'm against it. Not at all.

I know it sounds corny, but we live to live!

If your heart is set on owning your own place, a sanctuary you can paint any color you want, where you can build a life and pass it down to your kids, then buying a property is the only way to achieve that. It offers a sense of security and stability that renting can't match. No one can kick you out (unless you stop paying the bank, of course).

The key is to separate the emotional decision from the financial one. Buying a home can be a wonderful life choice, but it is likely a bad investment choice. If your goal is to grow your wealth, you are almost certainly better off investing in the stock market.

So, to everyone out there renting, feeling ashamed or like you're wasting money: hold your head high. You are making a sound financial decision. You have flexibility. You have freedom. And you have capital that you can put to work in much more powerful ways.

Before you take on the immense financial burden of a mortgage, ask yourself honestly: Do I truly, in my heart of hearts, want to own this property?

If, after everything, the answer is still yes, then you should totally do it.

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