Welcome to the Zoomaverse (and you are welcome to it).
Mark Twain is famously credited with saying: “Buy land, they’re not making it any more.” And then along came the metaverse.
No doubt we all remember our basic micro-economics course and what we learned about the importance of demand and supply in setting prices. Given that the global population of just under 8 billion is forecast to grow to around 10 billion by 2050, the demand side looks promising. In this context, the lack of new supply would make land seem to be a highly attractive asset.
Indeed, the evidence that’s available shows that the value of land has generally risen in real terms over time. The real price of UK farmland grew by 0.33% annually over the 232 years from 1781 to 2013 and by 0.71% from 1801 to 2013 (Jadevicius, A; Huston, S; Baum, A and Butler, A [2018]: ‘Two Centuries of Farmland Prices in England’, Journal of Property Research, Vol 38, pp 72-94). In real terms, houses in Amsterdam grew in price by 0.45% for the near-350 year period from 1628 through to 1974 (Eichholtz, P (1997): ‘A Long Run House Price Index: The Herengracht Index, 1628-1973’, Real Estate Economics, 25:2, pp175-192).
A recent paper suggests that long-term real income growth rates for UK commercial and residential real estate owned by Oxbridge colleges has been close to zero for all property types (Chambers, C; Spaenjers, C and Steiner, E [2021]: ‘The Rate of Return on Real Estate: Long-Run Micro-Level Evidence’, HEC Paris Research Paper No FIN-2019-1342). But buildings wear out over time and depreciate in real value, and sometimes they even depreciate in nominal value. A long-term real income growth rate of zero for buildings sitting on land surely implies real increases in land values. It’s not just the author of Huckleberry Finn suggesting that you should buy land, it’s the data too.
