In Russia people tend to be extremely biased considering real estate. 17 years of  enormous growth after USSR collapse has definitely played its role.

A lot of my mates around consider real estate to be a silver bullet investment for all times. A worthy thing that would definitely pay off in future.  

While residential property is considered to be a silver bullet, commercial real estate is valued even higher. Absolute gold.

Real estate index, Moscow

Many of them are ready to spend all their savings and get into mortgage, just to possess own property.

My point is that real estate is not a rocket. Furthermore, I've got concerns that real estate prices have all chances to get into serious trouble in future.

How do I consider real estate?

Real estate is infrastructure

Colourful noise
Photo by Nik Shuliahin / Unsplash

Real estate prices are considerably determined by location. While location is infrastructure in a broad sense.

By infrastructure I mean not just physical facilities, like transport or distance to the city centre and school. It's more about opportunities.

First of all, career and job opportunities, available judicature, education level, health care and so on. After all, they combine into standards of living.

Infrastructure comes to be a determinant in demand on real estate, forming its prices. While the level of comfort is somewhat a derivative of all this things, and it's not crucial.

That's why shitty apartment in city N may cost times more than super elite penthouse in city R. Just because you've got times less chances to succeed in R.

Real estate is a future infrastructure

Actually, real estate prices are projection of expected infrastructure. Indeed, we try to price now according to our beliefs about future opportunities of the location.

No matter how we regard real estate, it's starting to sound like an investment. If so, I'm gonna take out my crystal ball.

Real estate is an investment (you probably won't wanna hold)

If your real estate investment is not REIT exchange traded fund, it might bring you headache.

REIT indexes vs S&P 500

Yeah I know... Even though it's been an outstanding decade for stocks... Does real estate at least outperform inflation rate?!


Obviously it's not something that can be easily bought or sold. Furthermore, real estate purchases bear noticeable agency service commissions, time and yes, headache.


Real estate maintenance comes at a cost. Taxes, utilities, repairing, either insurance or risk of loss.

If it is a standalone house, it usually requires constant improvements and fixes. (Very similar to your project codebase)

Wear out

Real estate unlike wine, doesn't get better with years. Wires and cables, water pipes, dry rot in the attic or cellar.

Don't forget that it's becoming old-fashioned rather fast, devaluing costs on design and repairing.

Building standards

Though it's all country and city specific, but in general there are more advanced house building standards in more developed countries.

In other words, those things that can be only met in overpriced "elite" residential compounds of shitty locations are likely to be absolutely natural in more developed locations.

Supply and demand

There are 7,6 billions of us, and we are probably gonna double in the next 100 years. We will need a place to live.

Would real estate prices increase just because of that? Will the increased demand be absorbed by building companies that are constantly building new square metres?

Building companies are usually highly leveraged. They simply cannot stop building. In general, they are interested in building and selling more.

At the same time they are not interested in price drop, so they have to balance supply with demand. Build and sell as much as possible without price drop.

At least while there is no cheaper ways of building houses.

3d printed houses are already here

I imagine that in future we will be able to download a 3D model of a house from something like github for houses. Schedule a building-site-3D-printing-robot in an uber-like app and get a house in couple of weeks.

Rates, Yields, Taxes

We have no idea about monetary policy of the governments in future.

We don't know how large the taxes on real estate will be and how the whole economy will look like. We don't know if we are gonna have basic income or zero-rates.

But what we've already seen is negative mortgage rates. Is it the shadow of the future economy state of things?

Remote ok

Photo by Goran Ivos / Unsplash

Can we wipe out location dependence with IT implied to remote workflow?

It reminds me the times, when industrial revolution led to urbanisation process. But now it's vice versa. IT may drive de-urbanisation process and allow to change modern megapolis lifestyle to something more relaxed.

On the employers' side it definitely requires significant workflow transformation. But after all it only brings profits. Freedom to hire talents all over the world, save on headquarters, etc.

I've met only a few guys who ever agreed to work on-site in office after extensive remote experience.

It brings profit for all except landlords, but at least they would have a chance to turn their anthills headquarters into cozy coworking spaces.


That's one more nail in the coffin of real estate. This time it is commercial real estate funeral.

Why do we need those billions of square metres of stalls if we can buy anything online without time wasting?

Ok, as for clothes it's still questionable. But as for the rest.... I can hardly remember my latest visit to the mall, except to pick up my delivered package. Even groceries is a thing I usually get delivered.

Sharing Economy

Bike sharing is very popular amongst the Netherlands and Belgium.
Photo by Mika Baumeister / Unsplash

Sharing makes sense when need something for a short period of time. Usually there is a threshold, when possession becomes more beneficial than rent. That principle works for everything: taxi vs carshare vs own car. The same for houses, e-scooters, yachts, etc.

What if we are not going to stay on the same place for the whole life and would like to swap cold winter for a warm seaside? Windy autumn for a mild summer, eh?

How many houses will we need for that and do we need to possess any of them?

Ocean of prices

I believe that remote job may open new opportunities for cost efficient locations with high level of comfort and ecology.

For those, that lacked attention before due to a poor job opportunities.

Will this skyrocket prices for those locations? Frankly, I doubt.

Even if we redistribute real estate prices of the most expensive locations among the whole world, average price of previously underpriced areas won't get significantly higher.

  • Like redistribution of wealth won't make everyone rich.
  • Like peeing in the ocean won't make it warmer.

Real Estate Graveyard

Photo by Luís Alvoeiro Quaresma / Unsplash

That all may sound like real estate is already dead.

Absolutely not. Hodlers are firmly against!

Though I'm feeling pessimistic about real estate in general, I have no idea what can drop demand on the most amazing touristic attractions on the earth.

Anyway we cannot turn a blind eye to the facts that the shape of how we interact with real estate might significantly change. Unfortunately we don't know how much it will take for the next disrupt: 30 years or 100 and what will be the result.

"Can you imagine, we took a mortgage with 10% rate and payed for decades just to have a place to live!"  

Lost Places 2019 - Heilstätte Grabowsee
When I was a child, self-driving cars, VR, AR could be only seen in science fiction, while the only telephone at our home had a disk dial and wire. Photo by Denny Müller / Unsplash

We are all in the same boat

Photo by Osman Rana / Unsplash

One of the reasons for my concerns is that I'm also a hodler. I've got an apartment.

I also have a hobby. I like to explore real estate items for sale online. Check the prices, look at interiors, locations, views from the window. That's pretty exciting, you know.

Sometimes I meet items of my dream that I would like to live in. Sometimes quite affordable, sometimes affordable only with the help of mortgage. Sometimes I meet super attractive deals, that could really make sense.

And you know what? I always throw away these thoughts from my head due to my view on real estate in general.

If only we lived in a world where REIT didn't 3x underperform SP500.

Ok Google. Mortgage or rent?

Photo by Tierra Mallorca / Unsplash

The second most popular question in the world after "Do aliens exist?"

Everybody tries to find one-size-fits-all answer to that question without taking into account interest rates, location-specific opportunities and a lot of other things.

Rent vs. Mortgage

I've got a nice concept. At first site it seems like mortgage and rent are solutions for the same problem: "where should I live?".

I came across an idea that these two guys are completely different strategies that simply do not compete and should not be compared to each other.


Rent is indeed an answer to "where should I live". As simple as choice of your internet provider monthly plan, your Digital Ocean instance droplet or gym annual ticket.

Should I build my own gym, datacenter or put my own cables on the bottom of Atlantic ocean? - No way.


Mortgage is related to a quite different question: "should I borrow with rate X and invest in real estate".

So first of all we should find out if we should invest in real estate. That's exactly what I've been trying to find out the whole article.

Once I came across a nice index:


  • rent income is annualized income as % of the total price. Yield in other words.
  • price change is annualized price change as % of the total price
  • expenses are annualized as % of the total price
  • for interest rate we can take common bank deposit rate.

It can be sometimes found on real estate online services, calculated for some specific region. For example, for Moscow.

  • Unfortunately it doesn't include liquidity, hidden risks of no renter and wear out. Though the numbers can be adjusted to include it, of course.
  • Prices are also theoretical, as there is only one way to find out real price - sell it.
  • We should keep in mind that it changes over time.

Rent income MUST included. It makes sense because we should either rent it out or live in and save money on rent ourselves.

What for

The indicator is rather informative and allows to see who real estate investment compares to a supposedly risk-free fixed income bank deposit.

Additionally, we can always check global REIT indexes to feel the pulse of ROI.


I consider mortgage as simply a leverage of the investment.

If the expected returns on investment is higher than the interest rate paid for the loan, and risk is affordable, that all might make sense.


If you use our photo, we’d love it if you credited our website
Photo by Thought Catalog / Unsplash

What we might expect from the day after tomorrow?

  • Lower building costs
  • Higher demand due to population growth that may be balanced by supply
  • Decrease of locational demand driven by career and jobs
  • Increase of locational demand driven by comfort of living, ecology and cost-efficiency
  • Tourists attractive locations are gonna feel fine
  • Decrease of mortgage rates

Mortgage or rent?

  • Rent if need a place to live
  • Invest if ROI is attractive
  • Use leverage if ROI covers loan interest rate

Relax, man. The housing bubble has collapsed in 2007, we are all safe.