Real estate as investment

Why do real estate prices keep rising faster than people's income in most parts of the world?
Governments want real estate prices to rise faster than the economy. When prices rise,

• more taxes are collected.
• more employment is generated.

To aid the rise in real estate prices, governments

• give tax concessions to real estate investments.
• lower interest rates for real estate loans.

When real estate prices rise, more people are attracted to the real estate investments. The cycle is self-fulfilling and similar to a Ponzi scheme.

How will this cycle end?
The cycle can end in two ways

1. There is a collapse of real estate prices. This is unlikely because government will pass laws to cushion the fall e.g. lower interest rates, tax concessions to real estate investments, etc.
2. Real estate prices will stay flat or be mostly stable. This is more likely because of government's support to real estate.

Real estate has ceased to be a good investment in most parts of the world. Sure, if you want to live in a house, go ahead and buy it. But, if you are purchasing property, so that you will sell it for a profit in few years; then it is likely that you will make a loss or (at best) little profit.