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why does everyone fail to understand that the reason real estate is an "investment" is because prices are skyrocketing because supply is artificially constraine

why does everyone fail to understand that the reason real estate is an "investment" is because prices are skyrocketing because supply is artificially constrained. If we just built properly real estate wouldnt be such a great investment. My parents happened to buy their house in an area that wasnt super desirable and continued to not be super desirable. If they had just invested their down payment in the S&P it would be worth twice what the house is. But as it is, investors seem convinced real estate is a great investment because governments refuse to let people build so prices continue to skyrocket. In Japan the value of a building reaches $0 after 30 years because they rebuild everything. A building is an inherently depreciating asset, yet my tenement in Boston build in the 1880's continues to go up in value because they cant build shit.

chung8123 3y ago
There is only a finite amount of land. The land value will most likely rise with demand and inflation regardless of the building that is there. Owning a home is an investment because you need a place to live and in the location on where you want to establish yourself. A home going up in value only helps a person on the side and hurts them in the short term because of taxes. Also only accounting for the downpayment is an incomplete investment picture. Most real estate is bought on leverage which multiplies returns. You cannot force people to think that the value of a building is zero just because you want it to be. We have seen new homes further out command very high prices here in the US because of culture and there are a lot that desire the fit and finish of a new home but for the most part the old homes are still desirable and livable. Eventually old homes are rebuilt or remodeled and if they sell at the lowest point (like after a fire) will be sold for land value.
- konschubert 3y ago
  Last time I checked, the bay are was mostly single-storey homes. You could probably house 10 times as much people on the same land if you bought 6 storey apartment blocks. Land is finite, but upzoning it still reduces the cost of a square meter of floor space. I agree with you that the value of real estate is : building + land. While the building deprecates, the value of the land is going up. But this can at least be dampened by upzoning and by taxing land value.
- anthonypasq 3y ago
  all im saying is that investment groups would not be investing in real estate over tech stocks if supply wasnt artificially constrained.

chung8123 3y ago

There is only a finite amount of land. The land value will most likely rise with demand and inflation regardless of the building that is there. Owning a home is an investment because you need a place to live and in the location on where you want to establish yourself. A home going up in value only helps a person on the side and hurts them in the short term because of taxes. Also only accounting for the downpayment is an incomplete investment picture. Most real estate is bought on leverage which multiplies returns. You cannot force people to think that the value of a building is zero just because you want it to be. We have seen new homes further out command very high prices here in the US because of culture and there are a lot that desire the fit and finish of a new home but for the most part the old homes are still desirable and livable. Eventually old homes are rebuilt or remodeled and if they sell at the lowest point (like after a fire) will be sold for land value.

konschubert 3y ago
Last time I checked, the bay are was mostly single-storey homes. You could probably house 10 times as much people on the same land if you bought 6 storey apartment blocks. Land is finite, but upzoning it still reduces the cost of a square meter of floor space. I agree with you that the value of real estate is : building + land. While the building deprecates, the value of the land is going up. But this can at least be dampened by upzoning and by taxing land value.
anthonypasq 3y ago
all im saying is that investment groups would not be investing in real estate over tech stocks if supply wasnt artificially constrained.