When somebody next claims to you that RE, or any investment, always goes up “in the long run”, or by “x% p.a. over any 20 year period”, and that you should therefore simply buy & hold, show them this diagram. It’s from Carl Richards, at a NYTimes investment blog 10 Aug 2010. One implication is that the time that you buy can make massive differences in your actual dollar returns. – vreaa
Here’s another interesting thing.
One of those global “money” institutions did a real estate analysis, and they looked at the potential of price increases over the next 20 years. This is based on population numbers and the realization that in general there are three phases:
- Phase 1: Young, out of school, taking on debt, buying a house etc.
- Phase 2: Established career, debt is reduced and wealth is being build.
- Phase 3: Retirement, where the money is being used up.
They now concluded that based on population age distribution there will be downward pressure on prices by around 30% in North America and as much as 75% in Germany / Europe.
This is interesting because this means once the bottom has been found it STILL isn’t really where it’s supposed to be.
It strikes me that for the next 20 years real estate as a financial investment is dead, unless you have rental property that you can rent out for a profit. But all signs point to even that being problematic.
Guess we’ll know sooner or later which direction this is going to go.