A Gene That Makes Us Buy Real Estate?

Stephen Chung

Managing Director

Zeppelin Real Estate Analysis Limited

August 2005

Your humble author has recently been invited by the business school of a prominent local (Hong Kong) university to give a talk, naturally on real estate. As the talk fell on a Saturday and in order to make life fun, the interesting title of “Why Do We Buy Real Estate?” was chosen.  

Why do we buy real estate is an interesting title, you ask? That’s like saying reading War & Peace for laughs. Perhaps ‘how’ do we buy real estate makes better sense than ‘why’, which to most is second nature. Quite true, yet contemplate the following “answers” (commonly accepted reasons) to the ‘why’ given by the audience (MBA students) and your author’s stimulating (or irritating, depends on your angle) response to them: 

A)     [Audience’s] Real estate offers and helps maintain investment value = [Author’s] could be true but not always, just ask those investors and home buyers who had entered the Hong Kong real estate market in 1997. They still have not seen the prices gone back up to the level they had paid. Furthermore, one can invest in real estate funds (REITS) through which one can expect to collect a dividend (as if receiving rental income) without the hassle of real estate ownership and management, plus the fund prices can also go up (or down) just like the real thing.

B)     A home offers a warm feeling of family etc = yes, and being humans, most even if not all require some degree of family acceptance and warmth, and this in turn contributes to our healthy growth and personal development. Nonetheless, this still begs the question, why does it (the home) have to be bought? Are you saying that a home can only be warm and fuzzy IF it is bought and owned, and that a home created on rented premises can never be warm and fuzzy? More to the point, you find your spouse, kids, even the family dog lovely when the home is bought, else you find them intolerable. IF that is the case, your humble author has no more to say other than that you may require professional psychiatric help, my pal.

C)    For security and safety etc = “security” here refers NOT to the security fences and guards stuff but sort of a peace of mind of having done ‘something’ in life, now that one can sit back, relax, and start to focus on building up a business or family. True, buying a home epitomized by the bricks and mortar does give a solid feel, thus maybe a secured and safe feeling as well. However, in the previous generation or two, many people had raised families and built businesses and livelihoods on rented premises (at least in the beginning). Home-buying is usually a good thing for most families, but there is no need to have it overly intertwined with marriage as seen in recent years.

D)    For vanity, pride, and recognition = this is a very subtle subconscious aspect having to do with human psychological needs, touching upon spectrums of Freud and Maslow. The real estate developers understand this aspect very well and this explains in part their tendency nowadays to glorify their new projects with names related to royalty, high brow culture, and so on. Even the buyers will not admit to having such tendencies and they will quote the project’s tasteful design, state-of-the-art building features etc to justify spending what they have spent on the home. However, what better way to impress one’s friends (or even fiends) and relatives than with a $MMM dollar home? The most expensive car costs only $M, dropping $MMM worth of stocks (equities) in front of people looks silly, even assuming they realize their worth, and only crooks need carrying $MMM around with them nowadays.  

The list can go on much longer yet your author wishes to limit the article to no more than 2 x A4 pages. The main point here is that generally accepted real estate buying / investment reasons such as for investment profit, rental income, wealth, good location, good property management, good building design, good accessibility, even favorable market conditions, and the like, are “frontal” ones, masking and sometimes shielding the human desire to crave for warmth, security, and safety, and to express their feeling of pride, achievement, and success. What cannot be seen, touched, and easily pointed to, can be more important that what can be seen (e.g. wealth), touched (e.g. buildings), and pointed to (market conditions) from a motivation viewpoint.  

Genetics and neuroscience have been progressing tremendously in recent years and it seems from what are reported and recorded that most, if not all, human actions (including thoughts) involve some brain chemistry which in turn seems linked to genes. While it is doubtful if a “direct” home-buying gene exists, yet given that genes may have something to do with human desires (conscious and subconscious ones) as aforesaid, real estate seems to offer the best option in that it combines practical use (to live, to work etc), investment goal (wealth accumulation etc), pride (success recognition etc), vanity (showing off etc), and the like into one, which other investment vehicles simply cannot compare.  

Notes: The article and/or content contained herein are for general reference only and are not meant to substitute for proper professional advice and/or due diligence. The author(s) and Zeppelin, including its staff, associates, consultants, executives and the like do not accept any responsibility or liability for losses, damages, claims and the like arising out of the use or reference to the content contained herein.  

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