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Living in a Renting World

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I have been struck recently by an anecdotal list of big ticket items that can now be rented, and the wide disparity between the selling price, and the rent.

- Richard Branson's Caribbean Island paradise. A dreamy bungalow suitable for 26 people can be rented for $350k/night. He originally wanted to live there, plowed a lot of money into it, and now leases it as a resort.

- Private jets - The average cost of a 3 hour flight using a shared leased aircraft (1/8th ownership) is $125k/flight. You can take a maximum of 4 people. A first class ticket on a comparable flight is $6k.

- Luxury Yacht - owners are selling their boats, and finding few takers. You can lease them for $25k-$50k/week. Crew are extra.

- Luxury flats - in Beijing have risen 400% in the past 5 years, averaging $600k. However, rents are $600/month. 

In all these cases, the owners of these items seem to have a collection of the world's most expensive pet rocks. The carrying costs of these toys can be considerable - how much does it cost to keep a $50mm yacht in working order vs how much time you spend on it? In the event of a cash crunch, your beautiful boat can end up being very annoying.

There are plenty of people who can buy the island, the yacht and the plane, and maintain 3-4 homes, but how many new entrants (or better - people who THINK they are now in this club) would be willing to buy these baubles? If you can lease, and maintain the appearance of belonging, why spend the cash? 

This logic - the inverse of what was standard practice 5 years ago - applies to all economic strata. People are renting whereas they normally would have bought.

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Guest Monday, 25 May 2020