Investing in housing and commercial premises, the best formula for retirement savings?
We continue to see brick as a great source of savings and investment. However, real estate investment may not be the best in the long term.
It is not uncommon to hear from someone that their bet for retirement is to invest in housing or commercial premises. The argument, almost always, is based on the belief of the endurance of the value of the brick. That is, we think that it doesn’t matter what cycles it goes through, but housing does not lose value in the long term . This belief may be no more than that, a belief. Even more knowing that time can be your best ally or enemy with money .
It is clear that investment in housing or premises can be profitable. However, when we talk about retirement savings tools , we are talking about something else: we have to value the long term.
Yes or no to the house to save
Suppose we intend to acquire a home as an investment to obtain a return that allows us to count the amount of money needed to supplement our pension. In short, retirement savings are based on seeking that complementary amount.
First, for an average saver, this type of investment concentrates all of it in a single asset, without any diversification. That is, all the eggs of our investment will be in the same basket. In the event of a market coup like the one we have experienced only 10 years ago, our investments would not only be immobilized, but that they would lose value, which in some cases, could exceed 100%. It will not be strange that we all remember homes sold at half the price for which they were bought, it is not science fiction.
Same saver to assume a similar risk in investment products
If we told that same saver to assume a similar risk in investment products , he would say no. However, the roots of brick investment mean that we do not quite understand that it is not a guaranteed investment at all. In general the Spaniards prepare our retirement badly and this one of the reasons, among others.
Moreover, if we compare the expenses that the acquisition of that real estate will entail over time, and cross them with the intended profitability, we see that in the long term it falls significantly.
Variable that we do not always contemplate
To all of the above, we must add a variable that we do not always contemplate, but which is a reality. First of all our country has a huge housing stock, but a birth rate of the lowest in Europe . A future scenario, in which there are many homes, but less than the current ones are necessary, is more than plausible. Shortly after we understand how demand and supply works, we can understand that, although the value of things goes up and that of brick can also do it annually, this rise may not be compensated by lack of demand. Or with excess supply.
In short, covering our basic need for housing , brick investment can be a complement to saving for the future, it is true, but, as a unique tool, it may not be the best of ideas.