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The Wise Investor

are simply a 'silent partner', contributing money while
someone else does all the work.
Besides farming and agriculture, the second use of land is
for living space. When a person is lost in the wild and living
in hazardous conditions, it is said that they can survive for
three minutes without oxygen, three hours without shelter,
three days without water and three weeks without food.
This saying highlights the critical need for shelter and a place
to live.
More than anything else, it is this fact which gives
property investment its fundamental value.
The third use of buildings and land is for commercial
purposes, such as office buildings, factories and shops.
Let's spend a little time looking at the factors which
affect the prices of property.
There are four major factors which affect property
prices.
First, we have inflation. Inflation is a phenomenon which
results in cash reducing in value over time.
As a result of this the price of real assets such as
properties and shares increases. Note that the actual value
has not increased, just the price when expressed in dollars.
It is a small consolation to own a property that has
doubled in price if everything you want to spend the money
on has doubled as well. The price of properties, then, tends
to rise over time to compensate for inflation.
The second factor is the growth in population.
All prices are determined by supply and demand, and the
demand for housing is largely related to the increase in
population.
If the population increases strongly, then demand for
houses will rise and prices will increase.
Population growth results from two things, the birth of
babies and the immigration of people into the country and the
area.
Country towns are particularly susceptible to large rises
and falls in population.
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