Over-investment in housing can leave a homeowner’s wealth vulnerable to the fluctuations of the market, Satyajit Das warns.

As home prices climb again in many countries, including the U.S., former banker Satyajit Das warns that the use of homes as financial assets can leave a homeowner’s wealth vulnerable to the whims of a volatile housing market. He believes that this dependency on real estate investment was a “central factor” in the financial and economic issues of the last few decades.

“Treating houses as a financial instrument leads to an undiversified investment portfolio, with 50%-80% of your assets concentrated in a single asset — your home,” Das says. “[And] price fluctuations are exacerbated by the illiquidity of the asset.”

Das points some of the blame at government subsidy of home ownership, which he believes leads homeowners to over-invest in real estate. He also notes that completed homes do not reliably produce income, profit, or employment, and constrict the movement of the labor force.

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