The authors of the aforementioned study — Òscar Jordà, Moritz Schularick and Alan M. Taylor — have constructed a new database for the U.S. and 15 other advanced economies, ranging from 1870 through the present. Their striking finding is that housing returns are about equal to equity returns, and furthermore housing as an investment is significantly less risky than equities.
In their full sample, equities average a 6.7 percent return per annum, and housing 6.9 percent. For the U.S. alone, equities return 8.5 percent and housing 6.1 percent, the latter figure being lower but still quite respectable. The standard deviation of housing returns, one measure of risk, is less than half of that for equities, whether for the cross-country data or for the U.S. alone. Another measure of risk, the covariance of housing returns with private consumption levels, also shows real estate to be a safer investment than equities, again on average.
Furthermore, due to globalization, returns on equities are increasingly correlated across countries, which makes diversification harder to achieve. That is less true with real estate markets, which depend more on local conditions. So buying real estate in different countries, if you are in a financial position to do so, is a good way to diversify, in some ways better than equities.
None are good when that city is not your home town.
Buy only at your local cities and home towns where you can take complete control at worst times.
When you buy elsewhere, other than home town, you need to depend on external property management (high cost involved), maintenance (most likely high cost involved - story below), one trip to that home (exceedingly high cost), if there is a lawsuit (who knows - exceedingly high cost), selling nightmare risk.
Above all currency devaluation and conversion risk. Your yield will come down drastically.
At one time, my property manager told me to replace the roof (costs $15000) while I found the right fix with $800. Remote control costs you.
Depending on local tax law, and other law, we need to comply…lot of hassle.
There are lot of dis-advantage of such diversification than benefit.
We are all all mom-and-pop investors, not a big real estate investment company to look for diversification. Make sure you buy in driving distance.
Even after this explanation, if you buy remote control homes, one day you will realize the truth, then experience alone remains with you.
You have not been to Shenzhen, Hong Kong and Singapore, mostly condos (here called apartments), hardly any post-war shacks that in dire and constant need of all kinds of maintenance and repairs.
That is the intent! Currency hedge! Don’t believe your realtor and journalists.
I visited Hong Kong & stayed in Singapore 10 days and I knew the flat system, with high story concrete structures like skyscrapers. Tenants destroy your home interior.
Mom-and-pop investor does not need diversification as they need to save/get higher yield (survival).
Even after this explanation, if you buy remote control homes, One day you will realize the truth, then experience alone remains with you. Why am I telling bold high lighted? I realized the truth and my experience only remains now. Rest is your inference…
