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Well, no. House prices appreciate over time because people's income increase and historically do so faster than inflation. For instance in the UK, in the earl
by mytailorisrich 4y ago
Well, no.
House prices appreciate over time because people's income increase and historically do so faster than inflation.
For instance in the UK, in the early 1970s, the average house price was less than £5,000.
Is it reasonable to expect houses to still cost about £5,000 when the average income pa. is now £38k. Of course not.
OK, what about adjusting this by inflation since 1970? Well it turns that gives about £63k. Clearly that'd still be a massive bargain compared to people's income, which means prices would not stay that low.
Bottom line is that as long as (a) houses do not depreciate fast because of fear and tear, (b) that population grows, and (c) that people's income grow in real terms then housing prices will grow and thus real estate will be seen as a viable investment at least to offset inflation.
Frankly this "housing can't be an investment" stance is ideological.
- HDThoreaun 4y ago> Frankly this "housing can't be an investment" stance is ideological. All stances are ideological. The fact remains. If housing increases in value faster than wages it is by definition becoming less affordable. If it doesn't than it isn't an investment. The only solution to housing affordability is to stop making laws that ensure housing will increase in value faster than wages.
- mytailorisrich 4y agoNot faster than wages, as that's not sustainable over the long term, but faster than inflation as long as the same keeps happening for wages (which it has over the last 100 years though there is no guarantee to continue). The constraint is incomes. This is not ideological. This is simply a natural consequence of people getting richer (incomes beat inflation). Nothing in my previous comment is ideological, either. It's an observation of the economic forces at play.
- HDThoreaun 4y agoSo we agree, housing affordability and housing as an investment are incompatible. Not sure what you're arguing here?
- mytailorisrich 4y agoNo, I never claimed that. The opposite, actually... Cheers.
- HDThoreaun 4y agoHousing is increasing in value far faster than wages. That is what makes it an investment. If it increased in value at the same rate as wages it by definition wouldn't be investment.
- mytailorisrich 4y agoNo. Anything that increases in value at least with inflation is a profitable investment.