Why Is It Called 'Real Estate', As Opposed To 'Fake Estate'?

To understand the origins of the term ‘real estate’, we first need to understand what are real assets.

The word ‘real assets’ essentially means tangible physical assets that have intrinsic value.

Examples of this would include precious metals like gold and silver, land or real estate, and natural resources.

To further refine the classification of assets, there are immovable and movable assets where the Malaysian law defines them as:

Land, interest on the property, rights or interest that may be obtained from land (Section 66, Evidence Act 1967)

Cash, shares, saving accounts, EPF, insurance, vehicles, firearms, jewellery, and valuable goods. This excludes all types of licenses such as vehicle permits and business licenses that cannot be inherited.

Now that the air is (hopefully) cleared about the differences you’d need to know, let’s begin the historical course of action!

For almost half of human history, we moved around as nomadic tribes never calling any one place home.

Over time, we learnt to plant vegetables, and this was the turning point towards becoming an agricultural society, which eventually led to land and homeownership.

Those who were strong enough to defend their land got to keep it, and began organising themselves by electing tribal leaders.

And these tribal leaders would slowly take charge of land distribution, settle disputes, collect taxes and rent, ensure security, and lead the community towards advancements.

Soon, farming methods were improved on with the introduction of irrigation techniques, forts and temples were built and this new way of life led to a population explosion.

As farming villages grew into cities, tribal leaders maintained ownership of the land by naming an heir within their own family. And so, it was that Kings, Tzars, Pharaohs, and Emperors were born.

Without the first agrarian societies some 30,000 years ago, the implementations of safety and security measures, and other advancements, the global population would not have been able to steadily rise and trade would have been limited.

We would have experienced the industrial revolution muchhh later, which was the engine that helped increase the wealth of the world, thus allowing the average Joe and Jane to take out home loans to own properties!

For thousands of years, we valued gold for its beauty and more importantly its scarcity. It was so valued that governments used gold to back their currencies until 1978, directly linking their paper money to a fixed, tangible amount of gold.

Similarly, a land is called real estate due to the intrinsic value of the land and any house or building built on it.

As global populations increase and the supply of land becomes limited, land will almost always have real intrinsic value because as a society, we tend to value scarcity.

Value can fluctuate over time for various reasons and finding a stable store of value can be hard.

However, real estate generally tends to be more stable and appreciate over time. But it is less liquid, meaning its more time consuming and cumbersome to cash out compared to selling off jewellery or stocks and bonds.

You might be wondering what does all of this have to do with me? Why do I need to know what is real estate and what is real value?

This short history lesson is a mere introduction to crucial knowledge that everyone needs to know regarding global events impacting the value of different classes of assets.

Based on the events of 2020, more notably the stock market crash in March, anyone looking for a safe haven to hedge against market risk and the devaluation of global currencies from fat stimulus checks fled to gold and real estate as a store of value.

Whether you own real estate in the form of a family home or as an investor, it is important for everyone to understand the long term view of real assets in their lives.

With so many investment options like bonds, investment funds, cash savings, and insurance schemes that have a lower barrier of entry compared to real estate, it is often overlooked that none of these are tangible assets that hold any intrinsic value.

All of these investments will fluctuate with market movements and are considered risky but that does not mean real estate doesn’t come with its own set of risks.

However, with a little bit of research, planning and financial literacy, securing a piece of land will be one of the most valuable long-term investments you can make, especially when the markets are unstable and the economic outlook remains uncertain.

Real assets are where people have traditionally flocked to because there has and will always be demand for it. This is vital for everyone to understand.

Every notable investment portfolio allocates a sum of their investments into real estate, however small. This serves as a diversification of the said portfolio to hedge against any potential losses suffered on other investment fronts.

Likewise, every individual should have some form of real asset not only as a store of value for the future but also as insurance against financial issues such as an economic collapse.

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