Real Estate as a Store of Value – A Comparison With Gold and Bitcoin

Abstract

In Germany, real estate is commonly referred to as ‘Betongold‘ (English: ‘concrete gold’). This term reflects the fact that real estate is seen as a store of value and inflation hedge, similar to the commodity gold. These attributes have led to the transformation of real estate from a utility object into a capital investment and, in some cases, into a speculative asset. As a consequence of this transformation, macroeconomic developments on the capital market have significant impact on the real estate market (e. g. the past phase of low interest rates led to a historic real estate boom in Germany). The recent rise in interest rates is changing the preferences of private and institutional investors with regard to investment opportunities. In this context, the asset class real estate is competing with other asset classes. In this paper the value storage capacity of real estate and its transformation into a financial asset is explored. In particular, the effects of monetary policy on the real estate markets and valuation of real estate are considered. Furthermore, real estate is compared with the asset classes gold and bitcoin, which are mainly used for their capability to store value and preserve purchasing power in inflationary monetary systems. The aim is to assess the suitability of these asset classes as a store of value and inflation protection based on characteristics such as durability, preciousness, ease of storage, stability of value, rarity/scarcity and liquidity. The specific characteristics (and advantages and disadvantages) of the individual asset classes are analysed and compared.