- 22 Mar 2024 01:17
#15308544
@JohnRawls ROI is just an expectation, but whether things will go as expected is another matter. If you question from the perspective of hindsight why you should do this kind of loss-making business with an investment return rate of less than 1, then unfortunately, this is investment. There is no business that is 100% guaranteed to make a profit, and no one can predict the market development 100%. Before the development of a real estate, the expected return on investment must be much greater than 1, otherwise the project will not be approved, because this is not a small amount, and no one wants to screw it up. As for investment failure, I don't think investors will have any complaints.
Real estate is not a state investment, but a corporate investment. Infrastructure construction is synchronized with people. There are roads first and then buildings. This is one example of how real estate and infrastructure are two different things. Rather than the government building roads for the purpose of building housing. People do not choose certain properties. This is an investment failure by real estate developers and has nothing to do with the government.
JohnRawls wrote:There is no real difference economy wise if your building houses or infrastructure. To the contrary belief that there can't be too much housing or infrastructure, there certainly can be and it has happened many times in human history before even capitalism was invented.
The basic idea is that everything costs money to build or debt or financing or assets. If your return on investment is below 1-1 then you shouldn't be building it unless it is a common good. Actually even 1-1 ratio is bad because there are always at a given time investment that will produce more than 1-1 ratio meaning that they should be prioritized first. It goes down to the whole efficiency of economy argument and those who have inefficient economies will basically lag severely behind the rest and become poor while the ones that do those investment properly will prosper.
Going below 1-1 is basically becoming a zombie company/economy. There are plenty of them around even in the West. Usually these companies have to go in to bankruptcy and to the common belief that bankruptcy is bad, it is not. It is a tool to free up assets to be used in more productive ways in a fast manor in other sectors or places. And if you do not declare bankrupcy then you are just building up losses for the company and economy.
Now you can argue that infrastructure or housing is a common good but that is not something that you or me can decide. This is a societal decision of a country taking in to account the downsides of that decision that it will be a drain on the society if you decide it. But if you consider just the pure economic aspect of housing and infrastructure then China has crossed the road of no-return on its investment back in like 2010 for infrastructure and housing if not earlier. Not everywhere once again since Geography matters but in a lot of places. They will never get enough users of infrastructure and housing especially with declining population as of right now.
@JohnRawls ROI is just an expectation, but whether things will go as expected is another matter. If you question from the perspective of hindsight why you should do this kind of loss-making business with an investment return rate of less than 1, then unfortunately, this is investment. There is no business that is 100% guaranteed to make a profit, and no one can predict the market development 100%. Before the development of a real estate, the expected return on investment must be much greater than 1, otherwise the project will not be approved, because this is not a small amount, and no one wants to screw it up. As for investment failure, I don't think investors will have any complaints.
Real estate is not a state investment, but a corporate investment. Infrastructure construction is synchronized with people. There are roads first and then buildings. This is one example of how real estate and infrastructure are two different things. Rather than the government building roads for the purpose of building housing. People do not choose certain properties. This is an investment failure by real estate developers and has nothing to do with the government.