5 ms·

If the current value of something is over a "fundamental ceiling" it means that it's already inflated. Why would an investor park their wealth in such an asset?

nradov 5y ago
Sometimes there's just no good alternative. And real estate has less strict AML/KYC laws than other asset classes so we have some shady foreign money coming in.
- eru 5y ago
  > Sometimes there's just no good alternative. You can always just stick your money in an ETF.
  - kgwgk 5y ago
    Which may not be a good alternative.
    - eru 5y ago
      Well, you can also put your money into short-selling strategies, if you think stuff is overvalued. (Of course, taxes and regulations complicated this discussion.)
      - dagw 5y ago
        Of course, taxes and regulations complicated this discussion. It doesn't complicate the discussion, it is the discussion. Basically the only reason foreign investors are buying real estate in North America is because of issues directly related to regulations and taxes.
oarabbus_ 5y ago
P/E ratios of much of the S&P500 would indicate prices/values far over the fundamental value, yet investors continue to flock to large-cap equities in droves.
- selcuka 5y ago
  Not the same thing though. The ceiling here is about affordability, not the value of the asset. A house is a need for the individual buyer, not an investment.
  - oarabbus_ 5y ago
    That isn't true, even if it's not the majority, a significant number homes are purchased as rental/investment properties.
- imtringued 5y ago
  It's a bubble but it's hard to fight it. US runs a trade deficit vs other nations meaning the trade surplus nations have too many dollars which they send into the financial markets of the US. They most likely buy international companies that have a presence in their own country.
derefr 5y ago
A large part of the "foreign ownership" plaguing west-coast cities like Vancouver and Seattle is capital flight from China. In this case, real estate has the valuable property of being harder for a foreign government (who happens to be the government to which the homeowner is subject) to confiscate+liquidate than other assets, so said government will prioritize softer targets. Real estate as an investment class here is acting like a club on a car steering wheel—de-prioritizing theft, rather than inhibiting it.

nradov 5y ago

Sometimes there's just no good alternative. And real estate has less strict AML/KYC laws than other asset classes so we have some shady foreign money coming in.

eru 5y ago
> Sometimes there's just no good alternative. You can always just stick your money in an ETF.
- kgwgk 5y ago
  Which may not be a good alternative.
  - eru 5y ago
    Well, you can also put your money into short-selling strategies, if you think stuff is overvalued. (Of course, taxes and regulations complicated this discussion.)
    - dagw 5y ago
      Of course, taxes and regulations complicated this discussion. It doesn't complicate the discussion, it is the discussion. Basically the only reason foreign investors are buying real estate in North America is because of issues directly related to regulations and taxes.

oarabbus_ 5y ago

P/E ratios of much of the S&P500 would indicate prices/values far over the fundamental value, yet investors continue to flock to large-cap equities in droves.

selcuka 5y ago
Not the same thing though. The ceiling here is about affordability, not the value of the asset. A house is a need for the individual buyer, not an investment.
- oarabbus_ 5y ago
  That isn't true, even if it's not the majority, a significant number homes are purchased as rental/investment properties.
imtringued 5y ago
It's a bubble but it's hard to fight it. US runs a trade deficit vs other nations meaning the trade surplus nations have too many dollars which they send into the financial markets of the US. They most likely buy international companies that have a presence in their own country.

derefr 5y ago

A large part of the "foreign ownership" plaguing west-coast cities like Vancouver and Seattle is capital flight from China. In this case, real estate has the valuable property of being harder for a foreign government (who happens to be the government to which the homeowner is subject) to confiscate+liquidate than other assets, so said government will prioritize softer targets. Real estate as an investment class here is acting like a club on a car steering wheel—de-prioritizing theft, rather than inhibiting it.