I admire Warren Buffet's humility:
In the physical world, great buildings are linked to their architect while those who had poured the concrete or installed the windows are soon forgotten. Berkshire has become a great company. Though I have long been in charge of the construction crew; Charlie [Munger] should forever be credited with being the architect.
This is an excerpt from his recent letter to Berkshire Hathaway shareholders, which, this year, he opens up with an obituary to his late partner, Charlie Munger.
I don't agree with everything Warren says and writes. He, for instance, doesn't seem to like crypto and streetcars. Though, surely, he'd really dig my CryptoParisian.
That said, I never miss his letters and his thinking has been broadly instrumental in how I tend to think about real estate.
If you take his description (same letter) of what Berkshire does, and replace businesses with properties, this is what you get:
Our goal at Berkshire is simple: We want to own either all or a portion of [properties] that enjoy good economics that are fundamental and enduring. Within capitalism, some [properties] will flourish for a very long time while others will prove to be sinkholes. It’s harder than you would think to predict which will be the winners and losers.
This is a good way to think about real estate.
I sometimes wonder if I wasn’t born and raised in Toronto if I still would have gone to architecture school and become a real estate developer. I mean, if I grew up in Paris, maybe I would have become a fashion designer. Or if I grew up in Park City, maybe I would have started a snowboard company, slash become a ski bum. I would enjoy doing all of these things. And places certainly do influence us, more than most of us probably appreciate.
My point with all of this is that Canada likes to somewhat paradoxically over index on housing. I say paradoxically because we never seem to have enough of it for Canadians -- certainly the affordable varietal -- and yet:
"Canada relies heavily on its real-estate sector to power the economy. Housing investment in Canada as a share of gross domestic product reached 8.9% in 2022, according to the Organization for Economic Cooperation and Development, much higher than the 4.8% on average for the 38 member countries in the OECD."
I was speaking with our lawyer in Park City this week, and he commented to me that he wouldn't be going into the office next week because Old Town would be too hectic with the Sundance Film Festival going on. His office is right on Main Street.
When small mountain towns host major international events, there are going to be spillover effects. This is true of Sundance in Park City (population ~8,500) and it is true of the World Economic Forum, which was hosted in Davos (population ~10,000) this past week.
Perhaps the most obvious impact is that people can rent out their homes for large sums of money. And so lots of people both do that and try to profit maximize while doing it. Here are some anecdotes from Davos (via NZZ):
Ten days before the WEF, there are still 25 listings on the Airbnb internet platform. The prices here range from 8,000 to 56,000 Swiss francs. The son of an apartment owner says that his family receives 12,000 francs a week for their three-room apartment, which is quite close to the convention center. However, he says he assumes that they could achieve significantly more. The family rents out the apartment through an intermediary.