The returns aren't in the rent, they're in the capital gains. More gains than the stockmarket. This is why people are buying the units, especially from overseas. Sometimes they're even left unlet.
FYI, the vast majority of rental real estate is owned by investment firms who buy and sell entire buildings, not people buying units.
In general capital gains in an otherwise depreciating asset are tied to outsized increases in the revenue stream that asset produces. To put it another way, the increase in value is fundamentally driven by an increase in the number of people who want to use the building or the neighborhood - it's driven by a real utilitarian value that the asset does provide, or has the potential to provide for people.
If you think that real estate always goes up in value (above inflation) I would wager you've spent most of your life in the big cities where an increasing number of people want to live. I also have some lovely properties in Buffalo and Detroit that you might be interested in.
Of course, sometimes, in a frothy market, both professional firms and random individuals speculate on real estate, looking for capital gains disconnected from any underlying fundamental increase in utilitarian value. There are plenty of half-finished subdivisions in rural Florida that show how real this phenomenon is. However, it's an aberration, and it's fundamentally unstable so it doesn't tend to last for long.
Drawing conclusions about real estate markets in general from speculative bubble conditions is similar to drawing conclusions about technology companies from day trading on the Nasdaq in 1999.
Sorry, but this can't possibly be true. Since the 2008 crash the Dow Jones for example tripled in value while the San Francisco housing market gained 40%.
It is very rare that the real estate market outperforms the stock market.
In general capital gains in an otherwise depreciating asset are tied to outsized increases in the revenue stream that asset produces. To put it another way, the increase in value is fundamentally driven by an increase in the number of people who want to use the building or the neighborhood - it's driven by a real utilitarian value that the asset does provide, or has the potential to provide for people.
If you think that real estate always goes up in value (above inflation) I would wager you've spent most of your life in the big cities where an increasing number of people want to live. I also have some lovely properties in Buffalo and Detroit that you might be interested in.
Of course, sometimes, in a frothy market, both professional firms and random individuals speculate on real estate, looking for capital gains disconnected from any underlying fundamental increase in utilitarian value. There are plenty of half-finished subdivisions in rural Florida that show how real this phenomenon is. However, it's an aberration, and it's fundamentally unstable so it doesn't tend to last for long.
Drawing conclusions about real estate markets in general from speculative bubble conditions is similar to drawing conclusions about technology companies from day trading on the Nasdaq in 1999.