Is Real Estate more or less efficient than others assets?
I either hear that Real Estate is more efficient than other Sectors/Assets because it's easier to value RE than companies. I also hear that Real Estate is less efficient because it takes a longer time for prices to adjust (In some property types with longer leases) and it takes more time to buy/sell RE due to higher prices and longer due diligence.
Curious to hear your thoughts
Who cares
Too easy value, hard to actualize alpha. Interesting read though: 5 Reasons Why Public REITs Outperform the S&P 500 | Origin Investments
Far less efficient. Values tend to lag ‘actual’ market prices by 6-12 months. In addition, they tend to exhibit valuation smoothing, whereby they are valued on an annual/semi annual basis, so they inherently show less volatility than listed assets. To top it all off, information flows are incredibly asymmetric unlike listed exchanges which is one of the key tenets of market efficiency.
The answer is less, and that is why this field/asset class is so awesome to work with.. Below is the text from my favorite response I think I ever made that relates to this question.. Link to post https://www.wallstreetoasis.com/forums/whats-the-catch-in-cre#comment-2…;
Define "efficient" in this context. By the academic definition of "efficient markets" then RE is by definition much less efficient then say the US stock market. The US stock market is claimed to be one of the most efficient markets in that everyone has (or should have) equal access to information and relatively easy access to participate in the market itself.
It’s an inefficient market. There is always disconnect between the buyer and seller and some level of ambiguity about any given deal.
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