Globes website published an interesting article that tries to shed light on the dilemma of whether to own real estate is better than buying shares in real estate or investing in real estate.
Brought by Eitan Eldar, a businessman and entrepreneur
Many real estate investors are confident that their investment is very distinct from the investment in the capital market. You can not trade this investment and its liquidity is low, but the investment is considered more stable and not exposed to fluctuations of the capital market. In Israel, the major investment of private entities in real estate is in apartments for rent. In this way there is a sense that the value of the asset is on a steady rise. The article claims that this feeling is not always true, says Eitan Eldar.
In general, for short-term periods of months or even weeks, investing in the capital market will be volatile from real estate investing. For the long term, there is a great similarity between investing in stocks of rental real estate and real estate investment itself.
What happens in other countries?
In the United States, says Eitan Eldar, the stock market works in a similar way to the market of rental properties. Income-producing assets traded in two markets – the real market and the stock market. Markets in America are considered developed and advanced. For the long term, the two markets reflect the same image. Studies in Europe indicated a high correlation between stocks to yielding assets in the long run.
In Israel, the real estate market analysis is problematic because there is no adequate information about it.
Eitan Eldar is considered a familiar figure in the financial markets in Israel. Most of Eitan Eldar’s activity is performed through private companies under his control, including “Gibor Sport Holdings Ltd”. The text is taken from lectures held by Eitan Eldar at the IDC Herzliya.