Gold or real estate? Flip a coin


A popular term in Hindi; Roti, Kapda aur Makaan, translates as food, clothing and a house, the bare essentials for survival. While an average person toils and moils all year round so provide these for his family, the focus has shifted ever since the recent dip in gold rates. It has been a couple of years since share market enthusiasts have drifted and found their way to gold and real estate.
Having said that, one questions whether the returns given by these safer investments are likely to sustain. If gold rates have seen a 20% decrease, are real estate prices also likely to plummet? Is there any correlation between gold and real estate prices? According to a survey by Karvy, there is. Their results of the Hong Kong market said real estate index and gold prices have 81% correlation.
The Indian market has a similar story for the year 2012-13.
Builders and developers are coming up with new, affordable schemes to lure people into making purchases. Jewellers are known to tempt people into investing in gold by predicting a rapid rise in rates in the near future. In fact, when gold rates decline, people are known to sell their real estate investments in order to invest in gold!
So if you have not purchased a home yet and are waiting for that moment that rates see a fall, there is no guarantee that it may happen merely because gold rates have fallen and you may only hope for it to be true. One may argue that real estate prices may not go down considering land is limited after all but its demand is not. Gold on the other hand is not as limited as land for sure and is an international commodity so it’s rate is more likely to keep fluctuating. Land prices may stagnate at the most but not fall.
However, all these are debatable but the fact of the matter remains that people wait for a trigger to make them invest in either gold or real estate. One can work as a trigger for the other but will we be able to predict that? At least for now we can be delighted to not be forced to choose between food and clothing.