Growth, debt and illiquidity are relevant subjects this year for property investment. People are fixated by growth but the truth is, there are two types of growth. These are: genuine growth and artificial growth.
Genuine growth is often driven by a bigger sustainable market and an increase in productivity while artificial growth is driven by more debt in the economic system. Artificial growth can be bad especially if it is prolonged.
Debt, on the other hand, is consumption. It is assumed that when there is growth, consumption will continue. When many people buy illiquid assets, the price usually exponentially increases and the top could be difficult to call.
Meanwhile, the opposite applies when there isn’t enough demand for the supply and the market goes sour. This also applies to other investments such as real estate and cryptocurrencies.
Rules always change so it is important for property to grow and people need to continue borrowing. The outlook may not be wonderful forever despite us being brainwashed that it will be.
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