I think an important point is that people might mean a couple of different things by “investment:”
One is a more traditional idea of investment, which isn’t so much about money, or cashing in later - it’s about having this particular dirt here for myself after some period of time. I may never get a financial reward, but this plot of land is MINE.
Another way “investment” is used is indeed about a financial reward and being able to sell for more later. Basically speculation.
Regarding the former, this is a natural way to think about it and while it might be expensive, the rational makes sense even if I don’t agree with it.
Regarding the latter, I think this came about more recently as people empirically observed housing prices going up, often faster than inflation. Without really understanding WHY it’s doing that, you might think of it like stock.
But the real reason housing had been going up over the last decades is that the government (US, and many others) have poured a lot of money into that market in various ways: tax incentives, loans, etc.
Supply restrictions come into play as well, but that’s a very local thing and not generally applicable.
So it’s not connected to real outputs like an investment. It will only keep going up as long as the government keeps pouring in more money. And when they don’t, or can’t, it won’t. And that’s when the “investment” will start to look a lot more like a speculation gone wrong.
One is a more traditional idea of investment, which isn’t so much about money, or cashing in later - it’s about having this particular dirt here for myself after some period of time. I may never get a financial reward, but this plot of land is MINE.
Another way “investment” is used is indeed about a financial reward and being able to sell for more later. Basically speculation.
Regarding the former, this is a natural way to think about it and while it might be expensive, the rational makes sense even if I don’t agree with it.
Regarding the latter, I think this came about more recently as people empirically observed housing prices going up, often faster than inflation. Without really understanding WHY it’s doing that, you might think of it like stock.
But the real reason housing had been going up over the last decades is that the government (US, and many others) have poured a lot of money into that market in various ways: tax incentives, loans, etc.
Supply restrictions come into play as well, but that’s a very local thing and not generally applicable.
So it’s not connected to real outputs like an investment. It will only keep going up as long as the government keeps pouring in more money. And when they don’t, or can’t, it won’t. And that’s when the “investment” will start to look a lot more like a speculation gone wrong.