When there are 100 houses and 100 buyers in market, demand and supply is met and likelihood that transactions will yield fair prices is high. When investors fro

When there are 100 houses and 100 buyers in market, demand and supply is met and likelihood that transactions will yield fair prices is high. When investors from China and Wall Street descend on markets, you suddenly have 200 buyers and only 100 houses in market. If you live in a major city in western world, go meet the real estate agent nearest to you. Ask them how many bidding wars happen and how many deals are all cash. Most all-cash deals are almost always investor purchase. This is the reason (along with local laws on new construction) why we have housing inflated by massive 10% a year even though population gain is all but negligible. The result is that typical family now pays huge chunk of their income in highly inflated mortgage payment which is nothing but wealth transfer from them to super rich who hogged up critical resource in the hope to increase their investment return. As per Piketty's book, read this paper which has analysis on where major capital gains for rich come from: http://www.mit.edu/~mrognlie/piketty_diminishing_returns.pdf http://www.mit.edu/~mrognlie/piketty_diminishing_returns.pdf.