Stocks will bring you highs, but periodically will seriously let you down. Treasury bonds will keep you safe, but they won’t make you rich. Housing? That’s the best of both worlds. In rich countries, over the very long term, housing investments get you returns similar to equities (like stocks and other securities), while providing the low volatility of bonds.
This is the argument of a groundbreaking new paper from economists at University of California-Davis, University of Bonn, and the Deutsche Bundesbank (the central bank of Germany). In a feat of extraordinary data collection, the researchers pulled together the annual returns of treasury bills, treasury bonds, equities, and residential housing from 1870 to 2015 for 16 now-rich countries such as the US, Germany, and Japan. The dataset is the first of its kind.
They find that, in the average wealthy country, the annual return on housing during that period was just over 7% when adjusted for inflation, while the return on equities was just under 7%. At the same time, the risk associated with housing was far lower. By standard measures of uncertainty, housing was about half as risky as equities, and slightly less risky than bonds.
FWIW I remember an article from a couple of years ago that covered all the local billionaires in Singapore. and all but one made their money in real estate (regardless of the industry they originated in)
The ultimate investor, according to the study, would actually hold “an internationally diversified portfolio of real estate holdings, even more so than equities.
My wife’s family lives in Johor Bahru in Malaysia. @hanera should be able to expound on this area that is somewhat close to Singapore. Supposedly booming with Chinese coming in… You buy there, I get you someone from family to manage…
Well, in India Big fish eats Small fish. you need to have a good political clout if you are heavily invested in RE, that is your insurance. There is no MLS and land records are just getting digitised. Lots of anarchy
My dad is builder/developer since 1980s and involved with RE. We do lot of land, houses, apartments, the full circle of RE investing.
Sound like another article pumping REIT. Some big REITs are about to be listed? Or REITs are stalling and need support?
Historical annualized return of S&P index is 7-11%, how is housing better? Sound about the same.
In fact, their charts also show return of housing and equities are about the same.
Schiller says different but he doesn’t understand the concept of location. Real Estate is totally location dependent. Image the changes in one urban location in 150 years…
20% YOY growth
