Great take and agree! Obviously, it also comes down to your own personal circumstances and where you are in the world but as a general rule of thumb, yes.
In the real estate debate it's worth including consideration of leverage and market specifics.
Average folk use leverage when buying a property. Eg 100K investment for a 500K property. If the property goes up (or down) by 5%, the return (or loss) is equal to 25% on the downpayment investment. Average folk wont invest with leverage outside of real estate. In this way it's not an apples to apples comparison. If it's a rental unit and the property cashflows, then the 100K investment can grow both by loan pay down (by tenant) and by property appreciation.
Also real estate is very market specific. In Japan, you can forget about much land appreciation outside of Tokyo; versus places like Vancouver, where it can double every 7 to 10 yrs; and decaying centers where it can halve its value in the same time frame. Same investment. Different markets. Totally different outcomes.
These are fair points, and it is generally easier and less risky to leverage a property than stocks due to banks willingness to take a greater part of the risk when it comes to real estate.
However, leveraging stocks will in general give you better returns as their overall performance has outpaced real-estate markets in most countries (I know that volatility do make stock leveraging less viable than in real-estate, but my point still stands).
Regarding differences in real estate market, there is obviously discrepancies in countries, but even in very strong real-estate markets, its stock-market tends to outperform (Vancouver/Toronto are truly the outliers as their real-estate markets have been insanely hot while the S&P/TSX Composite Index has been lagging behind its neighbors. However, as you probably know, real estate has been dropping like a rock in recent months due to the foreign buying ban and increasing interest rates).
Just for fun, let's take the Case-Shiller NY-New York Home Price Index vs. the S&P 500:
Case-Shiller NY-New York Home Price Index
2012: 163.35
2023: 271.17
= 66% gain
S&P500:
2012: 1498
2023: 3982
166% gain
Again , this is not particularly exact science and I am definitely not saying you cannot make bank in the real estate market, but my thesis is that real-estate is a much worse investment than most people think, especially when considering the alternatives.
Great take and agree! Obviously, it also comes down to your own personal circumstances and where you are in the world but as a general rule of thumb, yes.
In the real estate debate it's worth including consideration of leverage and market specifics.
Average folk use leverage when buying a property. Eg 100K investment for a 500K property. If the property goes up (or down) by 5%, the return (or loss) is equal to 25% on the downpayment investment. Average folk wont invest with leverage outside of real estate. In this way it's not an apples to apples comparison. If it's a rental unit and the property cashflows, then the 100K investment can grow both by loan pay down (by tenant) and by property appreciation.
Also real estate is very market specific. In Japan, you can forget about much land appreciation outside of Tokyo; versus places like Vancouver, where it can double every 7 to 10 yrs; and decaying centers where it can halve its value in the same time frame. Same investment. Different markets. Totally different outcomes.
These are fair points, and it is generally easier and less risky to leverage a property than stocks due to banks willingness to take a greater part of the risk when it comes to real estate.
However, leveraging stocks will in general give you better returns as their overall performance has outpaced real-estate markets in most countries (I know that volatility do make stock leveraging less viable than in real-estate, but my point still stands).
Regarding differences in real estate market, there is obviously discrepancies in countries, but even in very strong real-estate markets, its stock-market tends to outperform (Vancouver/Toronto are truly the outliers as their real-estate markets have been insanely hot while the S&P/TSX Composite Index has been lagging behind its neighbors. However, as you probably know, real estate has been dropping like a rock in recent months due to the foreign buying ban and increasing interest rates).
Just for fun, let's take the Case-Shiller NY-New York Home Price Index vs. the S&P 500:
Case-Shiller NY-New York Home Price Index
2012: 163.35
2023: 271.17
= 66% gain
S&P500:
2012: 1498
2023: 3982
166% gain
Again , this is not particularly exact science and I am definitely not saying you cannot make bank in the real estate market, but my thesis is that real-estate is a much worse investment than most people think, especially when considering the alternatives.