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Commentary: Why do people still overwhelmingly pour money into real estate and properties?

Despite increasing popularity in new forms of investment, property remains the hoarder of two thirds of global net worth as housing prices soar, says the Financial Times’ Rana Foroohar.

NEW YORK CITY: Are real estate prices today the equivalent of bread prices? 

It’s a question that was recently asked by a trade union leader in Germany, where there has been a push to seize corporate-owned rental units and put them in public ownership. 

Many Dutch cities want to ban investors from buying cheap homes to rent out.

South Korea’s ruling party took a beating in mayoral elections for failing to stop a 90 per cent hike in the average price of a Seoul apartment.

China’s president Xi Jinping has made affordable housing a huge part of his common prosperity theme, saying that housing is “for living in, not speculation”.

We know home prices are inflated in many places. But a new study from the McKinsey Global Institute, which tallies up the balance sheets of 10 countries that represent 60 per cent of global income (Australia, Canada, China, France, Germany, Japan, Mexico, Sweden, the UK and the US), has some eye-popping numbers about just how much money is in real estate, and why.

The study, entitled The Rise and Rise of the Global Balance Sheet, looked at real assets, financial assets and liabilities held by households, governments, banks and non-financial corporations.

It found that two-thirds of net worth is stored in residential, corporate and government real estate as well as land. For all the talk of digitalisation, it seems that bricks and mortar are the new bricks and mortar.

How did this happen? And what are the implications?


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