Why does the value of land/real estate increase over time? Other commodities deflate or are unstable, what makes land a good investment most of the time?

381 views
0

Why does the value of land/real estate increase over time? Other commodities deflate or are unstable, what makes land a good investment most of the time?

In: Economics

Because the amount of land on earth remains fairly stable while the world population is increasing. More people need more land

All land is not a good investment. Land in desirable places is a good investment. It increases in value because lots of people want to buy it.

So, just make sure you have a crystal ball handy when you’re picking a parcel.

Bubbles-aside, this is largely due to the fact that the value of $1 decreases over time. Factor in the basic law of supply and demand and things can go wonky really fast. Look at some parts of the nation during the last housing crash. Particularly Detroit. Other parts of the nation exploded in value. This side of the equation looks at if the property is where people want to be. If they don’t, it won’t increase in value any more than the standard percentage of inflation, and it may actually lose value.

Generally though, things that are not being made anymore (that lots of people want) are stable investments. Precious metals and land being two of the top investments.

Also because inflation ; after time pass there’s more money in the world, so price raises.

Think of it has in a videogames ; the game create money from nothing when doing quest, so at a moment you have lots of money, but nothing much interesting to buy, so the devs add expensive things to the game for you to buy. You have lots of money, but interesting things cost way more than before.

Keep rarity in the equation as well. For houses, flats … it is “location location location” one of the main factor.