Investment vs Speculation 投资与投机

Investment vs Speculation/view/210838/178045?from=rss_relatedWhen it comes to housing prices, people often tend to confuse investment and speculation. In fact, there is a huge difference between the two. Buying houses for investment is always welcome, but if it is used for speculation, then it is not the case. At present in China's real estate market , it is not the investment but the speculation that is excessive. In this case, we should differentiate between investment housing and speculative housing on housing policies, encourage the former but prevent the latter.Investment is to invest funds at one time, and to be rewarded in subsequent years. Apart from principals , profits will be gained in a few years. For example, the capital gained from rent when buying houses for rent and the projects with profits every year when buying houses for the construction of factories, parking lots and warehouses are all investments.Buying houses for nothing and selling it after the price rises is speculative. There is a huge difference between the two kinds of housing sales. In stock market, buying and holding the stocks until getting the bonus is investment. Selling the stock after the price rises and making money from prices fluctuation is speculative.There is difference of speculation and investment in general merchandise . Trading for normal consumption and production is investment. While neither production nor consumption take place, but people are engaged in trade, to buy is to sell and m ake money from prices fluctuation , which is speculative.Is speculation beneficial or harmful to society? if money is made, wealth will be created, which is beneficial. If money is lost, it will be harmful to society. I have explained the reasons for it in details in the previous works I have written. Because of it, governments allow the existence of speculation. For example, futures market is a speculative market, which is beneficial to society.All trading can be divided into speculative trading and investment trading. Therefore, all the people involved can be divided into Speculative Group and Investment Group. People may earn money or lose money in speculation. So as a whole, speculative group will earn and lose money. If money is made after offset, the speculative group create wealth for society. ;If money is lost, the speculative group will cause a great loss for society. If speculation depends completely on luck, the probability of making and losing money is almost equal, which has no effect on society.( if the human resources andmaterials consumed are not included.) Therefore, speculation should be done by experts in speculation , who have a specialized knowledge of the market, specialize in estimating the trend of prices and earn money easily.Speculators must study and judge the prices of the market if they want to make money. For example, as for the food prices, the general rule is that the price is low in fall and high in spring. Therefore, if you buy food in fall and sell it in spring, you can make money. They regulate the surplus and deficiency in time, and smoot h out the price fluctuation, which contributes to society. But if too many people spe culates, they all buy food in fall, the food price will be artificially raised even higher than that in spring. At this time, the price is not decided by normal consumers an d producers but by speculators. When speculators confuse the market, none will m ake money.If a normal market is operated by a few experts in speculation , money will be make, which is beneficial to society. But if there are too many speculators, the price will be decided by speculators rather than by the normal consumption and production. Then speculation will be turned into gambling, which is of no benefit to society. problems of too many speculators in China's real estate market and the stock market exist. In these markets, whether people will make money or not depends entirely on luck, they neither smooth the price fluctuation nor predict the trend of prices.As for the real estate market, it is easy to differentiate the two different kinds of m otives sales. If people buy a house to live in by themselves or to rent, it is an inv estment house. While buying a house to sell after the price rises, it is an speculati ve house.Speculative housing must be available. It will become an investment hous e if someone lives in it. The house that can be put into the market at any time m ust be available. Transaction is difficult if someone lives in the house. The vacancy rate is high among the houses sold in large cities, indicating a lot of speculation i n housing. These houses are for sale anytime and anywhere. Once the housing pri ce decreases a little, speculators will find an early sell in order to avoid hold-up w hen everyone strives to buy houses early.Theoretically speaking, investment housing and speculative housing can be converted to each other.Houses for speculation can also be rented temporarily to earn rent, which then becomes an investment in housing.In fact, however, the reality we see is not the case.The national vacancy rate is so high , why don't they gain some additional rental by renting?It seems that it doesn't prevent the sale of housing. But houses left vacant for two or three years are abound, which means that the houses intended to see is not for rent.But if so many vacant houses are intended to rent, the rental prices will decline further. The current rent ratio (the ratio between rental price and buying price) has not been beneficial to buy a house, because to rent a house is far more cost-effective than to buy a pared with the price increase in real estate, the profits of rental housing appears to be negligible. Therefore, the owners of speculative housing don't care about the rent earned by renting. Relatively low rent has impeded the convert from speculative housing into investment housing. Generally speaking, therefore, it is fine to divide the purposes of buying houses into investment and speculation.There are different policies for different purposes of buying a house in order to improve the real estate market effectively. Now it is a good policy to impose property tax on luxurious houses.But the best way to curb speculation is to impose high tax on the sale of housing, which makes most speculators use what they have gained from speculation in real estate to pay tax.Nowadays, the speculation in real estate is too excessive, which needs suppressing .Butwe cant go to the other extreme, that is, a complete ban on speculation in real estate.A certain degree of speculation should not only be allowed but also necessary. That is to say, the vacancy rate should be kept in a proper number, because too low vacancy rate will block the transactions in real estate market. There were neither vacant houses nor real estate market in the planned economy. Changing houses was carried out by exchanging houses.The main reason for exchanging houses is to work nearby. Changing houses is different from market exchange, no capital is involved in the former and the price fluctuation can't be compensated. Only when both parties think its beneficial to them does the exchange succeed. This kind of pairing is not easy to succeed. From two parties to three parties, until 30 families exchange houses at the same time, the exchange can make all people satisfied.Because there is no vacant house to turn over, all people have to move on the same day if houses are exchanged.Tianjin once organised 30 families to change houses, which was spectacular . If there are vacant houses to turn over, there is no need for people to move together. This shows that it is essential to maintain a certain number of houses to facilitate the flow.By the way, the fact that people exchange houses proves that the value of the house vary from the people who use it, not just decided by the cost. When different people use the same house, the value is different. In other words, improving allocation can increase the enjoyment of whole society, which is the reason why economy studies the allocation of resources. If the society is to be wealthy, we should produce more, make the most of human resources and materials , and put what we produce into good use. The best way is to improve the allocation of resources by exchanging houses. Furthermore, the approach to increasing production is to improve the allocation of labor, capital and raw materials , and improve their value in use.Therefore, to improve the allocation of resources is the fundamental approach to social wealth.There are some reasons why so many speculative housing exist.First, high economic growth, high wealth accumulation and income distribution tilting the rich make some people have lots of money at hand.They don't have better opportunities to invest with this money and fear of currency depreciation, so the most convenient means of hedge is to buy houses.They have already had their own houses, so the reason for buying houses is merely to hedge and increase the value. They wait for a good price to sell .Nowadays, in order to curb housing prices, the government limits the means of buying a house, such as increasing the ratio of down payment, increasing the interest of the mortgage, not allowing selling the second suite or household constraints, but these methods are not sparse but blocking . There is still money left in the hands of people and is finding way out. If a lot of money floods into the stock market, the stock market will soar, which is also foam and hard to treat. The fundamental approach is to provide lots of opportunities for people to make money, so they won't buy houses again. The original capital market can be lifted, such as financial services, telecommunications, petrochemical, or providing opportunities of foreign investment for people and encouraging private capital into health care, education and other services.This is thefundamental solution to the problem.。