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Comment by joshuaheard | Hacker News Reader

A couple flaws in the article. If you don't buy a house but buy stocks, you will pay rent. According to the numbers in the article, this nearly cuts the stock return in half. Also, the article states you will lose money on the depreciation of the building, but does not take into account the appreciation of the land. The land appreciation is highly leveraged, as well, since most people typically place only 20% down on the property, but you gain the appreciation on the gross price of the estate.

But I would say that, here is Seattle, and probably all along the West coast, you do have foreign investment, mainly from China, driving up the cost of real estate.

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OP here.

I think I wrote:

> "the land doubled in value and is worth 200k CHF"

Even if you add up not having to pay rent and possible sale of the house (on which y) you would still end up much better with stocks:

House: You buy the house, after 30 years let's say the value stays the same: You own 500.000 CHF worth of house. (Assuming you had no repairs and the value stayed the same, which is VERY optimistic). You sell the house. you pay a whopping tax on that.

Stocks: You paid rent of 1600 CHF (numbers I used in the article). Within 30 years, you burn ~500.000 CHF on rent but you make 4-8 million CHF with conservative stocks assuming a 7-10% compound interest rate. In Switzerland, you sell this stock tax-free.

Is there anything I am missing?

I didn't get into tax treatment because I don't know Swiss tax rules. In the U.S., you pay the same capital gains on both a stock sale and house sale (and a personal residence sale may have the tax waived). You also get favorable tax treatment on a home, for instance, the mortgage interest tax deduction. If you buy a rental house, that is a tax deduction bonanza! Nearly everything is deductible. It's true the house depreciates. For a rental house, this depreciation is tax deductible. However, no real write-offs for a stock sale.

In the U.S., there will be gains on real estate since the average real property appreciation rate is 5-10%, about the same for stocks. But, you must look at cash on cash. I buy a $500k house for $100k cash. You must calculate the stock return on the $100k. However, you calculate appreciation for real estate on the total value of the land and house.

tldr: 5x appreciation on house vs. stock, with tax write-offs and no rent.

> Is there anything I am missing?

Like, lots, I think.

I don't own property in Switzerland, but you write as if property transactions are in cash up-front. Instead, you put some money down (why the GP mentioned leverage), and the amount you don't make back by investing in stocks is this opportunity cost. The amount saved in rent is also subject to compound interest; unless you are worried that this person is a serial home purchaser those savings will be invested in the market.

I'm sure you can come up with more details and that the market probably wins, but you asked what you were missing.

The article is also assuming exchange rates stay the same over that period. Unlikely.

If your crystal ball can forecast future exchange rates accurately, you can ignore all other investment advice and make millions off forex.

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