5 ms·

I assume people will continue to use real estate as an investment for as long as they are forced to escape the inflation of their currency.

jlmorton 3y ago
People don't just get to decide something is an investment. It depends entirely on the behavior of the rest of society.
- logicchains 3y ago
  >People don't just get to decide something is an investment They absolutely do in a democracy in which they (home-owning baby boomers) represent the biggest demographic voting block.
  - jlmorton 3y ago
    Well, I meant individuals don't just get to decide something is an investment. Certainly society as a whole, or even a large bloc of voters can decide something is an investment.
- paddez 3y ago
  Behaviour by the rest of society is influenced largely by public policy. In Ireland, investing in Housing/Land is largely one of the best investment assets you can own due to the lack of Capital Gains or Deemed Disposal rules.
kmlevitt 3y ago
This is such a cop out response. Even if we want to pretend there are no other investments, the real question is why don’t we just upzone cities end build more housing instead of artificially constricting supply so the baby boomers can get rich off the younger generations.
- kiratp 3y ago
  Because the boomers vote and the younger generations do not.
  - kmlevitt 3y ago
    Only now are we starting to see actual democratic referendums on these topics. For a long time everybody was brainwashed into thinking more construction = “greedy developers”, so nobody treated adding to supply as a possible solution. But the tide is starting to turn, and in a lot of state/provinces you are starting to see real change it last. British Columbia will soon up zone province-wide for example. And slowly you are starting to see some good initiatives passing in California.
  - deleted 3y ago
    [deleted]
  - dvsfish 3y ago
    In the context of Australia, voting is mandatory if you're >=18yo. We also have very unusual tax laws around owning a rental called negative gearing- if you're a landlord and your rental property earns less than it costs to run it, you can subtract the difference from your taxable income and pay less tax, as if having a tenant pay off most of your mortgage wasn't enough of a free lunch. A political contest vowing to get rid of this nonsense was annihilated when we tried it one election cycle around a decade ago.
    - zo1 3y ago
      That's not unusual at all, and calling it "negative gearing" is just a way to target it as if it's some evil concept. Afaik, everywhere in the world taxes on businesses are applied to profits not revenue. Subtracting your loss is completely normal. It's personal taxes that applies to your salary aka revenue that is weird and modern day serfdom.
      - siquick 3y ago
        > and calling it "negative gearing" is just a way to target it as if it's some evil concept. That’s what the tax office call it. https://www.ato.gov.au/individuals-and-families/investments-and-assets/residential-rental-properties/rental-expenses-to-claim#ato-Positiveornegativegearing https://www.ato.gov.au/individuals-and-families/investments-...
epistasis 3y ago
Housing is not the only way to escape inflation. There are several government bonds in the US that are fantastic for that. As would any productive investment. Housing (or rather, land) is unproductive investment, and should be treated as piggy banks, not as a place where wealth grows like investments do.
- xscott 3y ago
  Are these the bonds where you can only buy $10k to $15k per year? If so, that doesn't solve the problem for anyone who has the problem.
  - khuey 3y ago
    You're thinking of I-bonds but anyone can buy TIPS in effectively unlimited quantities.
  - JumpCrisscross 3y ago
    > Are these the bonds where you can only buy $10k to $15k per year? No, they're bog-standard Treasuries and, if you're particularly paranoid about inflation, TIPS [1]. Modern currencies segregate the store of value and medium of exchange functions. For the dollar, that means Treasuries and deposits. [1] https://en.wikipedia.org/wiki/United_States_Treasury_security#TIPS https://en.wikipedia.org/wiki/United_States_Treasury_securit...
    - dumbo-octopus 3y ago
      > A 2014 study found that conventional U.S. Treasury bonds were persistently mispriced relative to TIPS, creating arbitrage opportunities and posing "a major puzzle to classical asset pricing theory."[22] You seem to know things, is that arbitrage hustle still producing?
      - JumpCrisscross 3y ago
        > is that arbitrage hustle still producing? I don't have a good source of inflation swap prices, but I would assume it's persisted. It's not an easy trade to do leveraged, since your assets are marked to market. And there are natural buyers of vanilla Treasuries for collateral purposes.
Aurornis 3y ago
Real estate is a very high maintenance investment relative to stocks. The real reason people invest in real estate is because they can walk into a bank and get a low interest rate 30 year loan to buy that investment, which is not going to happen with any other investment class. People also invest in real estate mostly for the land, not the housing. Land is a scarce resource in growing cities. Demand goes up, supply stays the same. Building high density housing actually makes property more expensive, as it can command higher prices from developers. If they just wanted to escape inflation on a pure cash investment, real estate isn’t a great way to do that.
- khuey 3y ago
  > The real reason people invest in real estate is because they can walk into a bank and get a low interest rate 30 year loan to buy that investment This is true in the US but it's not true in other Anglophone nations with high real estate prices such as the UK or Australia.
  - doix 3y ago
    > This is true in the US but it's not true in other Anglophone nations with high real estate prices such as the UK or Australia It was definitely true until very recently. Interest rates of 1-2% weren't unheard of. Many of my friends had to really tighten up their finances when their interest rate from 1.2% to 5%.
    - pmg102 3y ago
      The low rates was true. But not the 30 year term. Most mortgages in the UK are fixed for 2-5 years so people are much more exposed to fluctuations in interest rates than in the US.
      - syndicatedjelly 3y ago
        We have the same thing in the US for mortgages, called the adjustable-rate mortgage (ARM). It got a very bad rep after the 2008 housing meltdown so it’s generally seen as a bad tool for consumers these days. Hence the current predicament - many American homeowners refuse to move because it means giving up a sub-4% loan. Which is essentially free money because of the current inflation rate.

jlmorton 3y ago

People don't just get to decide something is an investment. It depends entirely on the behavior of the rest of society.

logicchains 3y ago
>People don't just get to decide something is an investment They absolutely do in a democracy in which they (home-owning baby boomers) represent the biggest demographic voting block.
- jlmorton 3y ago
  Well, I meant individuals don't just get to decide something is an investment. Certainly society as a whole, or even a large bloc of voters can decide something is an investment.
paddez 3y ago
Behaviour by the rest of society is influenced largely by public policy. In Ireland, investing in Housing/Land is largely one of the best investment assets you can own due to the lack of Capital Gains or Deemed Disposal rules.

kmlevitt 3y ago

This is such a cop out response. Even if we want to pretend there are no other investments, the real question is why don’t we just upzone cities end build more housing instead of artificially constricting supply so the baby boomers can get rich off the younger generations.

kiratp 3y ago
Because the boomers vote and the younger generations do not.
- kmlevitt 3y ago
  Only now are we starting to see actual democratic referendums on these topics. For a long time everybody was brainwashed into thinking more construction = “greedy developers”, so nobody treated adding to supply as a possible solution. But the tide is starting to turn, and in a lot of state/provinces you are starting to see real change it last. British Columbia will soon up zone province-wide for example. And slowly you are starting to see some good initiatives passing in California.
- deleted 3y ago
  [deleted]
- dvsfish 3y ago
  In the context of Australia, voting is mandatory if you're >=18yo. We also have very unusual tax laws around owning a rental called negative gearing- if you're a landlord and your rental property earns less than it costs to run it, you can subtract the difference from your taxable income and pay less tax, as if having a tenant pay off most of your mortgage wasn't enough of a free lunch. A political contest vowing to get rid of this nonsense was annihilated when we tried it one election cycle around a decade ago.
  - zo1 3y ago
    That's not unusual at all, and calling it "negative gearing" is just a way to target it as if it's some evil concept. Afaik, everywhere in the world taxes on businesses are applied to profits not revenue. Subtracting your loss is completely normal. It's personal taxes that applies to your salary aka revenue that is weird and modern day serfdom.
    - siquick 3y ago
      > and calling it "negative gearing" is just a way to target it as if it's some evil concept. That’s what the tax office call it. https://www.ato.gov.au/individuals-and-families/investments-and-assets/residential-rental-properties/rental-expenses-to-claim#ato-Positiveornegativegearing https://www.ato.gov.au/individuals-and-families/investments-...

epistasis 3y ago

Housing is not the only way to escape inflation. There are several government bonds in the US that are fantastic for that. As would any productive investment. Housing (or rather, land) is unproductive investment, and should be treated as piggy banks, not as a place where wealth grows like investments do.

xscott 3y ago
Are these the bonds where you can only buy $10k to $15k per year? If so, that doesn't solve the problem for anyone who has the problem.
- khuey 3y ago
  You're thinking of I-bonds but anyone can buy TIPS in effectively unlimited quantities.
- JumpCrisscross 3y ago
  > Are these the bonds where you can only buy $10k to $15k per year? No, they're bog-standard Treasuries and, if you're particularly paranoid about inflation, TIPS [1]. Modern currencies segregate the store of value and medium of exchange functions. For the dollar, that means Treasuries and deposits. [1] https://en.wikipedia.org/wiki/United_States_Treasury_security#TIPS https://en.wikipedia.org/wiki/United_States_Treasury_securit...
  - dumbo-octopus 3y ago
    > A 2014 study found that conventional U.S. Treasury bonds were persistently mispriced relative to TIPS, creating arbitrage opportunities and posing "a major puzzle to classical asset pricing theory."[22] You seem to know things, is that arbitrage hustle still producing?
    - JumpCrisscross 3y ago
      > is that arbitrage hustle still producing? I don't have a good source of inflation swap prices, but I would assume it's persisted. It's not an easy trade to do leveraged, since your assets are marked to market. And there are natural buyers of vanilla Treasuries for collateral purposes.

Aurornis 3y ago

Real estate is a very high maintenance investment relative to stocks. The real reason people invest in real estate is because they can walk into a bank and get a low interest rate 30 year loan to buy that investment, which is not going to happen with any other investment class. People also invest in real estate mostly for the land, not the housing. Land is a scarce resource in growing cities. Demand goes up, supply stays the same. Building high density housing actually makes property more expensive, as it can command higher prices from developers. If they just wanted to escape inflation on a pure cash investment, real estate isn’t a great way to do that.

khuey 3y ago
> The real reason people invest in real estate is because they can walk into a bank and get a low interest rate 30 year loan to buy that investment This is true in the US but it's not true in other Anglophone nations with high real estate prices such as the UK or Australia.
- doix 3y ago
  > This is true in the US but it's not true in other Anglophone nations with high real estate prices such as the UK or Australia It was definitely true until very recently. Interest rates of 1-2% weren't unheard of. Many of my friends had to really tighten up their finances when their interest rate from 1.2% to 5%.
  - pmg102 3y ago
    The low rates was true. But not the 30 year term. Most mortgages in the UK are fixed for 2-5 years so people are much more exposed to fluctuations in interest rates than in the US.
    - syndicatedjelly 3y ago
      We have the same thing in the US for mortgages, called the adjustable-rate mortgage (ARM). It got a very bad rep after the 2008 housing meltdown so it’s generally seen as a bad tool for consumers these days. Hence the current predicament - many American homeowners refuse to move because it means giving up a sub-4% loan. Which is essentially free money because of the current inflation rate.