Glad to hear, got it. Eastern European countries are a particular case:
1) some folks got burned by funds and bank bankruptcies after the 90s, lack of trust in ownership of financial assets
2) lower financial education makes it like Real Estate is the 'only' way to invest besides deposits ... the real physical aspect of it gives a sense of safety and ownership ... and emotional attachment ... for some are also 'trophy' assets as they like to go through town and tell x, y, z I own this or that ... ego boost ... ego boost does not improve returns, usually lowers them in any asset class :)
3) huge recency bias in terms of RE performance: just had a talk with a friend from Romania the other day and he told me how his apartment doubled in price etc and he expects the same ... I explained that during communism there was no individual ownership, hence of course after communism was over prices went high and grew very well ... but the BASE EFFECT works from now on against you big time ... he would just not get it ... emotions ... then calls me later, dude you are right ... I can't expect the same because if so then in some decades it will be Monte Carlo prices here :)) ... and I am like 'yeah, bingo, great analogy' ...
Had similar discussions with many folks across the years ... some I meet randomly after 5 years and they remember what I said (because they did not like it then) but they realised in the mean time how things are ... and then they start offering drinks and lunch and all :) ... 'you opened my eyes man...' ... so yeah :) ...
4) similar in Austria in Vienna recently a distant chap bought some apartment and was very happy thinking it will double etc etc etc ... when I did all the calculations for him, the net yield around 1.7% (without considering the precious time to manage the property etc) ... I mean you get way more than that with a deposit and not moving a finger but a few clicks ... price appreciation should not be much higher than building / replacement cost & CPI etc ... unless some crazy supply/demand imbalance but where he bought I highly doubt it ...
All in all, RE is not bad, but education is key and knowing there are also many other alternatives which even if not yielding more, are less time, energy and stress intensive ... if yielding more, might have to endure some volatility but are liquid and not time intensive and trouble free to manage etc ... risk & return, pros and cons is my key message anyway ... there is 'no best' investment out there ... anybody preaching that out there, very good chance something is fishy or in the least worst case scenario, some huge confirmation and/or recency bias ... which is not helping anybody ...
Longer story in any case ... maybe one day I have a 'deep dive' on investing in real estate ... which can be good and work also but 'it depends' :) ...
So true! Real estate has a big unfair advantage - you can go to the bank and lever your savings with mortgage. Mortgage rates in Bulgaria are real deal now like 2.5-3%. I think that stocks are the best investment, but you are so right - best investment is different for everyone. Thanks for your great content!
I really love the idea about Real Estate. Particularly, the illustration of rental yield reminds me China property crisis at present, the intrinsic value of real estate really depends on location or macro envrionment. Housing Price always go up seems already embedded in lot of Chinese peoples' heart, but it doesn't make sense at all. Also, the joke of German goes to save money in Switzerland really make me Laugh Out Loud
Glad to hear, great take on China. HA, yeah, that is quite a valid joke also as reality :) ... and it applies to Austrians too where I live, but I just did not hear the joke here ... :). Cheers!
That first chart is great! I wish I would’ve seen that before I sent out my report today. More evidence that you can see improving rate of change in various economic indicators.
Ha, yeah, we need to make some fun also :). It applies to Austrians also for sure, likely even more, I just did not hear my folks around with that one :). Cheers!
Great thoughts about properties! Here, in Bulgaria, lives the same mass mantra "They always go up". Maybe people really want to touch the asset class
Glad to hear, got it. Eastern European countries are a particular case:
1) some folks got burned by funds and bank bankruptcies after the 90s, lack of trust in ownership of financial assets
2) lower financial education makes it like Real Estate is the 'only' way to invest besides deposits ... the real physical aspect of it gives a sense of safety and ownership ... and emotional attachment ... for some are also 'trophy' assets as they like to go through town and tell x, y, z I own this or that ... ego boost ... ego boost does not improve returns, usually lowers them in any asset class :)
3) huge recency bias in terms of RE performance: just had a talk with a friend from Romania the other day and he told me how his apartment doubled in price etc and he expects the same ... I explained that during communism there was no individual ownership, hence of course after communism was over prices went high and grew very well ... but the BASE EFFECT works from now on against you big time ... he would just not get it ... emotions ... then calls me later, dude you are right ... I can't expect the same because if so then in some decades it will be Monte Carlo prices here :)) ... and I am like 'yeah, bingo, great analogy' ...
Had similar discussions with many folks across the years ... some I meet randomly after 5 years and they remember what I said (because they did not like it then) but they realised in the mean time how things are ... and then they start offering drinks and lunch and all :) ... 'you opened my eyes man...' ... so yeah :) ...
4) similar in Austria in Vienna recently a distant chap bought some apartment and was very happy thinking it will double etc etc etc ... when I did all the calculations for him, the net yield around 1.7% (without considering the precious time to manage the property etc) ... I mean you get way more than that with a deposit and not moving a finger but a few clicks ... price appreciation should not be much higher than building / replacement cost & CPI etc ... unless some crazy supply/demand imbalance but where he bought I highly doubt it ...
All in all, RE is not bad, but education is key and knowing there are also many other alternatives which even if not yielding more, are less time, energy and stress intensive ... if yielding more, might have to endure some volatility but are liquid and not time intensive and trouble free to manage etc ... risk & return, pros and cons is my key message anyway ... there is 'no best' investment out there ... anybody preaching that out there, very good chance something is fishy or in the least worst case scenario, some huge confirmation and/or recency bias ... which is not helping anybody ...
Longer story in any case ... maybe one day I have a 'deep dive' on investing in real estate ... which can be good and work also but 'it depends' :) ...
So true! Real estate has a big unfair advantage - you can go to the bank and lever your savings with mortgage. Mortgage rates in Bulgaria are real deal now like 2.5-3%. I think that stocks are the best investment, but you are so right - best investment is different for everyone. Thanks for your great content!
Nice!
Welcome!
I really love the idea about Real Estate. Particularly, the illustration of rental yield reminds me China property crisis at present, the intrinsic value of real estate really depends on location or macro envrionment. Housing Price always go up seems already embedded in lot of Chinese peoples' heart, but it doesn't make sense at all. Also, the joke of German goes to save money in Switzerland really make me Laugh Out Loud
Glad to hear, great take on China. HA, yeah, that is quite a valid joke also as reality :) ... and it applies to Austrians too where I live, but I just did not hear the joke here ... :). Cheers!
That first chart is great! I wish I would’ve seen that before I sent out my report today. More evidence that you can see improving rate of change in various economic indicators.
Glad to hear. Next time will be in with some luck. Indeed, more evidence. Cheers!
The joke on Germans is a good one :-)
Ha, yeah, we need to make some fun also :). It applies to Austrians also for sure, likely even more, I just did not hear my folks around with that one :). Cheers!
Interesting post as always!
Glad to hear! Thank you for the feedback!