Quote:
Originally Posted by chowhou
Investments can be productive or unproductive for the individual and I agree that real estate investments don't seem to be as productive for the individual as other investments, but if the money is eventually flowing into other investments, that shouldn't matter in the broader perspective of the economy. Especially if it's not employing many people, the opportunity cost of capital taking a slight detour through a real estate transaction should be no worse than holding that same capital in cash for a couple months while finding another investment.
I'd say if someone owns a trucking business and they take 100% of the earnings and hide that money under their mattress for retirement, that's far worse for the economy than if someone buys a condo for an AirBnB and puts 100% of the earnings towards investing in local businesses.
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The whole point is that they are not flowing into other investments. Canada as a nation disproportionately allocates our cumulative available capital into overpriced real estate. Your argument is basically that if the Government spent $1 billion on a bridge to nowhere in Nunavut instead of the new Windsor/Detroit bridge, the "broader economic perspective" is that it doesn't matter because the contractors involved still got $1 billion and can now invest that money back into the economy. It ignores the reality that available capital is finite and every dollar invested in one sector is a dollar not spent elsewhere that could've produced significantly more positive externalities.
If your going to use your example you need to compare someone reinvesting the profits of their business back into said business, vs. a landlord reinvesting into more real estate in a finite market.