RosebyAnyName
Staring at the ceiling for 6 hours
- Nov 9, 2023
- 331
A lot of people (at least in the west) who became wealthy in the past decade off of sharply increasing property values assume that real estate is "the most profitable investment", but this is somewhat misinformed. The rapidly increasing property values we have been observing are not reflective of the historical returns, which normally perform worse than pretty much every other investment available. It's also possible that real estate can have another crash, or changing legislation can artificially increase or decrease the value. Just look at anyone who bought in 2022 and was forced to sell at a huge loss due to being unable to afford the costs of upkeep. In short, real estate is actually terrible for speculating. Similarly, having a rental property is a lot more work than people make it out to be, and can be a huge headache. Even wealthy people who own large amounts of rentals just pay a corporation to look after it, and the gains on rentals can be very unpredictable. Many people with a lot of wealth buy property and intentionally choose not to rent it out.
So, this begs the question: why do wealthy people buy land even if they don't plan on renting it out, and don't plan on selling it for a profit (capital gains)? Why do wealthy people hoard theoretically "unprofitable" real estate like vacant, unrentable, non-appreciating land? Or, they buy land with a perfectly livable, rentable house and just leave it to rot?
This is why: real estate is not traditionally an "investment", it's a park of wealth.
This means that it's great for keeping wealth stable because nothing is more stable and "real" than land. The "real" in "real-estate" isn't financial jargon, it literally just means "actual / in the real world" in this context. Currencies can become stronger or weaker, stocks and corporate investments can fluctuate in value a lot, but land never changes. Land is land is land, and will virtually always be very valuable. Even if the whole government collapsed and everyone is fighting eachother in a post-apocalyptic setting, guess what still has value? Guess what people will be fighting over? Land. Through prosperity and depression, land will always have value. This means that, even though there are more profitable investments on paper, real estate is considered the "best" investment for people that already have tremendous wealth. In fact, the only reason real estate "increases" in value at all (aside from bubbles and corrections) is because everything else depreciates in value faster. Nothing is more "real" than real estate. Even fiat currencies have only existed since maybe the 13th century. Meanwhile, land has always existed and has been fought over for millennia.
So, if you have a hell of a lot of money from your business activities, inheritance, or more risky investments, but you live in a shithole country that's just getting worse and your currency is turning into toilet paper, just buy a lot of land and your wealth will be "parked" in a much safer asset that will never be considered unvaluable. Who is richer? Someone with 1 billion dollars of a currency that you can't even force the banks to stop printing, someone with 1 billion dollars in stocks that could tank any second, or someone with 1 billion dollars worth of land that can never be replicated, will always be in demand, and will never lose value long-term?
So, in short, land is basically gold on steroids. It's why wealthy people want to hoard as much land as possible, even if they don't "use" it. They already have stable wealth that will keep them afloat, while all of us suckers who aren't already rich enough to load up on real estate are stuck with shitty bank-printed toilet paper that's just become more toilet-paper-like as time goes on.
So, this begs the question: why do wealthy people buy land even if they don't plan on renting it out, and don't plan on selling it for a profit (capital gains)? Why do wealthy people hoard theoretically "unprofitable" real estate like vacant, unrentable, non-appreciating land? Or, they buy land with a perfectly livable, rentable house and just leave it to rot?
This is why: real estate is not traditionally an "investment", it's a park of wealth.
This means that it's great for keeping wealth stable because nothing is more stable and "real" than land. The "real" in "real-estate" isn't financial jargon, it literally just means "actual / in the real world" in this context. Currencies can become stronger or weaker, stocks and corporate investments can fluctuate in value a lot, but land never changes. Land is land is land, and will virtually always be very valuable. Even if the whole government collapsed and everyone is fighting eachother in a post-apocalyptic setting, guess what still has value? Guess what people will be fighting over? Land. Through prosperity and depression, land will always have value. This means that, even though there are more profitable investments on paper, real estate is considered the "best" investment for people that already have tremendous wealth. In fact, the only reason real estate "increases" in value at all (aside from bubbles and corrections) is because everything else depreciates in value faster. Nothing is more "real" than real estate. Even fiat currencies have only existed since maybe the 13th century. Meanwhile, land has always existed and has been fought over for millennia.
So, if you have a hell of a lot of money from your business activities, inheritance, or more risky investments, but you live in a shithole country that's just getting worse and your currency is turning into toilet paper, just buy a lot of land and your wealth will be "parked" in a much safer asset that will never be considered unvaluable. Who is richer? Someone with 1 billion dollars of a currency that you can't even force the banks to stop printing, someone with 1 billion dollars in stocks that could tank any second, or someone with 1 billion dollars worth of land that can never be replicated, will always be in demand, and will never lose value long-term?
So, in short, land is basically gold on steroids. It's why wealthy people want to hoard as much land as possible, even if they don't "use" it. They already have stable wealth that will keep them afloat, while all of us suckers who aren't already rich enough to load up on real estate are stuck with shitty bank-printed toilet paper that's just become more toilet-paper-like as time goes on.
