Should you hold a house or cash in the future?

 Should we hold houses or cash in the future? I want to talk about this issue because my college classmates are discussing it in the group. Everyone is pessimistic about the future real estate market. The reasons are simple. First, the supply of houses is increasing; second, the population is decreasing. Third, the economy is not looking up at the moment.

Our classmates all graduated in 2012 and entered the society. Basically, they bought houses between 2019 and 2020, and they all entered the market near the highest point of housing prices. Therefore, the real estate market has been going down in the past two years, and many people are suffering. Many classmates calculated that they have paid for the house for several years, and the mortgage has not decreased much. Moreover, if they sell the house now, the down payment they paid before will basically be lost. You should know that most of the classmates have worked hard for seven or eight years as a couple, and then scraped together the money for the down payment.

I am lucky because I bought a house in 2017. From 2017 to 2019, first-tier cities saw a surge, and I still caught up. So even if it falls now, I still make some money.

At this point in time, almost everyone except a few experts is not optimistic about real estate. Friends who are familiar with me should know that I don’t agree with those who are pessimistic about real estate, and I don’t think that China’s real estate will collapse. So from my perspective, why is it better to hold a house or hold cash?

I tell you, my attitude is that it is better to hold a house. This is not that I think the house can still appreciate as quickly as in the past 30 years, but I think it would depreciate faster 30 years ago.

The increase in housing supply, the decline in population, and the slowdown in economic development are not known only now, but were basically predictable 10 years ago. Because any developed economy has gone through this path.

Since everyone knows the outcome, why were people still willing to buy houses crazily before? Therefore, future expectations are not the only factor that determines the direction of the market. Even more people will use the current actual situation to find the corresponding reasons.

To put it bluntly, the key reason why people were willing to buy houses in the past was that there was too much money. If you understand it this way, when a large amount of funds appear in the market, there must be an asset to settle, and the funds will not be idle in the market for too long.

For example, if you have money, you must invest in addition to spending, whether it is the stock market, the property market, or opening a milk tea shop. Those who say they don’t have to invest because they have money are crazy spenders, but they have never been rich. Because you can’t spend much money.

First, a normal person has very limited time to spend every year. Second, a person’s spending power is also very limited. If you eat abalone and lobster every day, you won’t spend much money in a year. So when you have more money, you naturally have to invest.

China's economy took off in the late 1990s. China’s property market also took off at the same time. This decline in the property market is actually the beginning of the turning point of China’s economy.

Let's go back to the previous topic. Since I have tied the real estate market to the economy, what will happen to the economy in the future? If nothing unexpected happens, the Chinese economy will have a long development cycle. Even with the United States, their GDP is still growing.

So the Chinese economy has potential. However, there is a problem with our real estate, that is, we have overdrawn too much in the past 20 years. So even if the economy develops in the future, the real estate market will still have a period of downturn, which is actually paying off the debt of the past 20 years.

But many people have an element that they don't consider when judging the real estate market, that is, the money supply. Many people don't understand that this world is actually driven by debt. Every government in this world uses deficits to promote economic development. Since the debt is increasing, the money supply will definitely increase.

At the same time, in the past year, both monetary policy and fiscal policy have been moving in the direction of easing. At the same time, because China is currently in an economic downturn, loosening monetary policy to stimulate the economy is definitely a general trend. Therefore, it is not difficult to foresee that our economy will rebound in the future through loose monetary policy stimulus.

This can confirm two things: the first is economic rebound, and the second is monetary easing. The final result of these two things is that housing prices will be corrected after oversold, and the second is that money will become less and less valuable.

Now it is basically certain that both houses and money will depreciate in the future, but money will depreciate faster, so for ordinary people, holding a house is still more cost-effective than holding a large amount of cash.