<p>By the way, after a house is built (whether it was built this year or many years ago) it does provide economic value. If renters live there, then the rent they pay is counted as a service in GDP. And if the home owners live there then the same thing happens, the government estimates the 'imputed rent' and that is counted in GDP.</p>

CC BY-SA 4.0
2020-10-22T14:26:46.653Z
2020-10-22T16:53:34.510Z
2020-10-22T16:53:34.510Z
Daniel
<p>Purchasing <em>new</em> homes would count as an investment. According to Blanchard et al. Macroeconomics: a European Perspective pp 568 in glossary investment is defined:</p>
<blockquote>
<p><strong>Investment (I):</strong> Purchases of new houses and apartments by people, and purchases of new capital good (machines and plants) by firms.</p>
</blockquote>
<p>The source above is the leading undergraduate macroeconomics textbook, so although the definition is not rigorous as it is an undergraduate text the houses are not included just haphazardly without thought. Also note the definition <em>does not</em> include land as correctly stressed in Brian's comment.</p>
<p>However, what the author in that book you cite probably has in mind is capital investment, which is specially investment in assets that will be used as factor of production (e.g. machines, trucks, factory). However, capital investments are not defined in terms of jobs that they create. That is, even investing in fully autonomous robot that would replace worker would be capital investment. This being said when capital and labor are complementary, which is still often the case, capital investment will also create more jobs.</p>
<p>Additionally, in economics when we talk about <em>real</em> variables, e.g. real output, real consumer spending, real investment etc. we mean inflation adjusted as opposed to nominal output, nominal consumer spending and nominal investment etc. that would not be inflation adjusted. So the book you are reading also does not seem to be following economic terminology much.</p>

CC BY-SA 4.0
2020-10-22T08:54:08.340Z
The key word in your Blanchard  quote is *new*
Henry
CC BY-SA 4.0
2020-10-22T08:56:52.017Z
@Henry yes, the Q only mentioned real estate in general and mentioned that it creates temporary work so the 'new' was assumed on my part, anyway added that more explicitly to first paragraph
1muflon1
CC BY-SA 4.0
2020-10-22T11:05:40.853Z
Your answer implicitly covers this, but I think it might be useful to note that the title says “real estate,” which normally covers land as well as buildings - and which does not count as investment. There was another comment noting the land exception, but people might not read the comments.
Brian Romanchuk
CC BY-SA 4.0
2020-10-22T11:07:55.973Z
@BrianRomanchuk thanks for the addition, you are right to stress that I edited the answer and added extra sentence to make it crystal clear to reader
1muflon1
CC BY-SA 4.0
2020-10-22T08:53:10.677Z
2020-10-22T11:07:25.453Z
2020-10-22T11:07:25.453Z
1muflon1
<p>In the book <a href="https://rads.stackoverflow.com/amzn/click/com/B009HL5YNQ" rel="nofollow noreferrer" rel="nofollow noreferrer"><code>The Financial Crisis and the Free Market Cure</code></a> in chapter 3 author said that investment in real estate is not really investment.</p>
<blockquote>
<p>It is jobs that create houses not houses that create jobs</p>
</blockquote>
<p>Author motivated it as: when we investing in factories we create new jobs which are producing some goods and after a year we have factory + goods and permanent skilled job place, but investing in real estate (homes) will create only temporary work place (real estate agents, builders etc.) which exists as long as new home is building as far as I understood.</p>

CC BY-SA 4.0
2020-10-22T08:22:24.033Z
debt tag there, because to buy a home mostly people will take mortgage, so they not investing their own money but someone's.
Andrew Sasha
CC BY-SA 4.0
2020-10-22T08:22:30.200Z
I've moved this question from `money.stackexchange.com` because it's look like better place for such questions.
Andrew Sasha
CC BY-SA 4.0
2020-10-22T08:50:39.603Z
Buying land or existing buildings is not net new investment as somebody else is selling it.  Constructing a new building is investment if it going to be used: it generates value in its use, which is why rent can be charged (if the owner is using it then the "rent" is in fact an opportunity cost)
Henry
CC BY-SA 4.0
2020-10-23T20:03:13.850Z
I suggest that’s confusing too many things; most obviously that the land, not the houses, constitutes real estate.

Then, how will you define “creating” jobs? If hiring 100 builders to put up 100 houses “creates jobs” then what happens when the estate is complete, in a few years if not months?

IMHO, the idea that keeping those workers on for my next project “creates” another 100 jobs is risible. Does anyone doubt that?

Does whether those jobs are lost/maintained/protected/extended or what, matter?
Robbie Goodwin
CC BY-SA 4.0
2020-10-23T20:08:38.127Z
By the way, other countries seem to have different ideas and here in the UK, almost no-one is actually interested in buying houses as bricks and mortar… rather in buying a mortgage which gives a share in a pile of bricks for long enough to make a vastly greater profit than they could from any other safe or legitimate investment.
Robbie Goodwin
<gdp><economic-growth><investment><debt><development-economics>
Is investment in real estate a real investment?
Andrew Sasha
# Is investment in real estate a real investment?

(Asked by: username_0 on 2020-10-22)

In the book [`The Financial Crisis and the Free Market Cure`](https://rads.stackoverflow.com/amzn/click/com/B009HL5YNQ) in chapter 3 author said that investment in real estate is not really investment.

> It is jobs that create houses not houses that create jobs

Author motivated it as: when we investing in factories we create new jobs which are producing some goods and after a year we have factory + goods and permanent skilled job place, but investing in real estate (homes) will create only temporary work place (real estate agents, builders etc.) which exists as long as new home is building as far as I understood.

**Tags:** gdp, economic-growth, investment, debt, development-economics
> **Comments:**
> **username_0**: debt tag there, because to buy a home mostly people will take mortgage, so they not investing their own money but someone's.  
> **username_0**: I've moved this question from `money.stackexchange.com` because it's look like better place for such questions.  
> **username_1**: Buying land or existing buildings is not net new investment as somebody else is selling it.  Constructing a new building is investment if it going to be used: it generates value in its use, which is why rent can be charged (if the owner is using it then the "rent" is in fact an opportunity cost)  
> **username_2**: I suggest that’s confusing too many things; most obviously that the land, not the houses, constitutes real estate.  Then, how will you define “creating” jobs? If hiring 100 builders to put up 100 houses “creates jobs” then what happens when the estate is complete, in a few years if not months?  IMHO, the idea that keeping those workers on for my next project “creates” another 100 jobs is risible. Does anyone doubt that?  Does whether those jobs are lost/maintained/protected/extended or what, matter?  
> **username_2**: By the way, other countries seem to have different ideas and here in the UK, almost no-one is actually interested in buying houses as bricks and mortar… rather in buying a mortgage which gives a share in a pile of bricks for long enough to make a vastly greater profit than they could from any other safe or legitimate investment.  

---

## 2 answers

### Answer by username_4 on 2020-10-22. Score: 10 | Accepted answer

Purchasing *new* homes would count as an investment. According to Blanchard et al. Macroeconomics: a European Perspective pp 568 in glossary investment is defined:

> **Investment (I):** Purchases of new houses and apartments by people, and purchases of new capital good (machines and plants) by firms.

The source above is the leading undergraduate macroeconomics textbook, so although the definition is not rigorous as it is an undergraduate text the houses are not included just haphazardly without thought. Also note the definition *does not* include land as correctly stressed in Brian's comment.

However, what the author in that book you cite probably has in mind is capital investment, which is specially investment in assets that will be used as factor of production (e.g. machines, trucks, factory). However, capital investments are not defined in terms of jobs that they create. That is, even investing in fully autonomous robot that would replace worker would be capital investment. This being said when capital and labor are complementary, which is still often the case, capital investment will also create more jobs.

Additionally, in economics when we talk about *real* variables, e.g. real output, real consumer spending, real investment etc. we mean inflation adjusted as opposed to nominal output, nominal consumer spending and nominal investment etc. that would not be inflation adjusted. So the book you are reading also does not seem to be following economic terminology much.

> **Comments:**
> **username_1**: The key word in your Blanchard  quote is *new*  
> **username_4**: @Henry yes, the Q only mentioned real estate in general and mentioned that it creates temporary work so the 'new' was assumed on my part, anyway added that more explicitly to first paragraph  
> **username_5**: Your answer implicitly covers this, but I think it might be useful to note that the title says “real estate,” which normally covers land as well as buildings - and which does not count as investment. There was another comment noting the land exception, but people might not read the comments.  
> **username_4**: @BrianRomanchuk thanks for the addition, you are right to stress that I edited the answer and added extra sentence to make it crystal clear to reader  

---

### Answer by username_3 on 2020-10-22. Score: 3

By the way, after a house is built (whether it was built this year or many years ago) it does provide economic value. If renters live there, then the rent they pay is counted as a service in GDP. And if the home owners live there then the same thing happens, the government estimates the 'imputed rent' and that is counted in GDP.


---

