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I've seen this argument before. Why shouldn't it be an investment? 1. Land is a limited resource. 2. Property improvements last for a very long time, and are i

I've seen this argument before. Why shouldn't it be an investment? 1. Land is a limited resource. 2. Property improvements last for a very long time, and are incrementally improved. 3. The buy-in price is relatively high, so only very interested parties get involved. 4. It's a home for goodness sake, why would you not call it an investment?

manfredo 7y ago
Housing cannot be both affordable and and a good investment. The definition of a good investment is a piece of property that has a price that increases over time. The nature of exponential growth means that eventually housing will become unaffordable if it is perpetually a good investment. Society's expectation that housing is a good investment results in people taking on significant debt to buy increasingly expensive homes. The consequence is that homeowners have a huge incentive to suppress the construction of additional housing, to inflate the values of their homes. And when housing prices do fall, people's financial lives are ruined. Contrast metros like SF, Portland, and Seattle with places like Tokyo where homes can be bought for < $400,000. A big part of this is that housing is expected to be a depreciating asset: https://www.youtube.com/watch?v=iGbC5j4pG9w https://www.youtube.com/watch?v=iGbC5j4pG9w
- kortilla 7y ago
  You’re conflating “an investment” with “an exponentially growing investment”.
  - strstr 7y ago
    That's sort of the classic interpretation of investment. AFAIK, the first question most people ask about investments is "what is the expected rate of return (relative to the risk)?". I would not describe my car as an investment, since it's basically guaranteed to depreciate. Housing could be expected to behave in a similar manner (although that would likely require a decrease in population growth).
    - kube-system 7y ago
      The value of the structure does often decrease over time. The land might be a different story, if it’s a neighborhood where people want to move. Location, location, location. You can get property that decreases in value too, just move into a neighborhood in decline.
  - manfredo 7y ago
    A good investment is an exponentially growing investment. Any investment with consistent year over year growth % is growing exponentially. Any investment that does not grow exponentially will eventually be outpaced by inflation and is thus not a good investment.
dredmorbius 7y ago
Who made the land? What contributes most to increased value? What are economic rents? What is the perfect tax? What is the land value tax?

manfredo 7y ago

Housing cannot be both affordable and and a good investment. The definition of a good investment is a piece of property that has a price that increases over time. The nature of exponential growth means that eventually housing will become unaffordable if it is perpetually a good investment. Society's expectation that housing is a good investment results in people taking on significant debt to buy increasingly expensive homes. The consequence is that homeowners have a huge incentive to suppress the construction of additional housing, to inflate the values of their homes. And when housing prices do fall, people's financial lives are ruined. Contrast metros like SF, Portland, and Seattle with places like Tokyo where homes can be bought for < $400,000. A big part of this is that housing is expected to be a depreciating asset: https://www.youtube.com/watch?v=iGbC5j4pG9w https://www.youtube.com/watch?v=iGbC5j4pG9w

kortilla 7y ago
You’re conflating “an investment” with “an exponentially growing investment”.
- strstr 7y ago
  That's sort of the classic interpretation of investment. AFAIK, the first question most people ask about investments is "what is the expected rate of return (relative to the risk)?". I would not describe my car as an investment, since it's basically guaranteed to depreciate. Housing could be expected to behave in a similar manner (although that would likely require a decrease in population growth).
  - kube-system 7y ago
    The value of the structure does often decrease over time. The land might be a different story, if it’s a neighborhood where people want to move. Location, location, location. You can get property that decreases in value too, just move into a neighborhood in decline.
- manfredo 7y ago
  A good investment is an exponentially growing investment. Any investment with consistent year over year growth % is growing exponentially. Any investment that does not grow exponentially will eventually be outpaced by inflation and is thus not a good investment.

dredmorbius 7y ago

Who made the land? What contributes most to increased value? What are economic rents? What is the perfect tax? What is the land value tax?