Both sides are right.
What you have to understand in real-estate is there are cultural differences between countries.
Here in Australia we have a very high home ownership ratio relative to the US (I can't remember the exact ratio but it is something like we have double the ownership rate of the US per capita and even more so than in England where it is very low).
Because of that cultural difference the demand for houses here in Australia (particularly major capital cities) will always be high (Australian's are basically coastal fringe dwellers). With a net immigration (also into those cities) you have a constant demand for housing.
robots and most property people understand is that in the long term (> 10 years) houses will appreciate in *intrinsic* value due to those demands. Hence why the double in 7 year rule.
The doom sayers on the other hand are right but for different reasons - it is the credit bubble added on top of the *intrinsic* value of housing that causes negative equity. What goes on here is that people (often highly leveraged due to low credit ratings or just starting out - hence outer suburbs where housing is cheaper) buy into the market late in the game at the point of highest rate of credit creation then the credit gets withdrawn. At this point the non-intrinsic value disappears as no new buyers come into play at the inflated figures (remember banks are not lending as much) and we hear cases of "negative equity maaaaate".
Those successful in real-estate have either learnt this or got lucky and entered the cycle early in the game - they have either positive or neutral equity. Either that or their gearing ratio is low enough that the outgoings are not killing their investment.
If you can hold on until either the intrinsic value of property goes up and/or the bubble value comes back again (as it will eventually) you will make money.
In the US there is an excessive supply problem in a lot of cities (caused by credit creation allowing developers to build more than demand really wanted). With a different cultural and legislative environment their housing problem - loss of equity is different to ours.
Question here is - is real-estate money easy money? I personally (my opinion) don't think so - but I am more a business and stock market focussed investor. For me having to look after tennants, spend weekends running around looking at run down properties then fixing them up is not my idea of fun. My fun is going to Sydney staying at the Intercon, dressing up to go to the Opera and spending quality time with my wife and family. Easy money is having companies and other people work for me rather than me subsidising someone to live in a house. But that is a personal preference. Some do enjoy being covered in plaster and paint on their weekends
However I will say to be in the stockmarket you do need to be a bit smarter about the economy than owning houses here in Australia. It is relatively easier to own investment property and make money than it is to do the same with shares particularly in times like these if you don't understand the game.
hello,
great post lakemac,
i wouldnt have clue what happens in the future,
we have to live somewhere and your "own home" is an option
thankyou
robots
