Does property qualify as a real estate commodity?
Investing in real estate or real estate developments has become a good business decision for many investors in Mexico, who have gotten great returns after purchasing property. This real estate boom has led to some experts beginning to see a a property as a real estate commodity. However, others disagree with this statement. Today, we'd like to delve deeper into this concept, so you can decide whether investing in a development, a home, or a lot, is investing in a commodity.
Defining commodity
In a very broad sense, a commodity can be defined as a tangible material that can be traded, bought, or sold. Usually, when talking about commodities, these are understood to refer to raw materials or primary goods such as wheat.
One of the main features of commodities is that they are traded with no qualitative differentiation in buying and selling operations, and their price is determined based on the supply and demand conditions of the market.
In recent years, the concept of commodity has expanded, because some experts consider that any industry that evolves by allowing many suppliers to create something that used to be made by one company can be referred to as commoditization of a product or industry.
Does real estate qualify as a commodity?
If we consider the above definition in parts, we can agree that real estate is a tangible material that is traded, bought, and sold. However, although the right to decent housing is a fundamental human right in Mexico, real estate are not considered primary goods or raw materials.
On the other hand, while it's true that some real estate businesses sell identical residences within the same neighborhood, property in general does have a qualitative differentiation which affects its market value. That is why some real estate agencies include special amenities within their developments; elements like sports centers or green spaces that increase a property’s market value.
This way, we can conclude that real estate does not qualify as a commodity, as its value and demand depend on external factors, such as location or social environment, as well as qualitative factors having to do with its infrastructure and design. However, real estate has become an element of speculation, since investing in a property could ensure long-term returns thanks to appreciation or profits received by renting out or reselling the property in question.
Invest in a real estate company that makes a difference
If you'd like to get returns on your investment, we encourage you to explore the real estate portfolio offered by SIMCA Real Estate. We offer everything from residential lots amd luxury apartments near the beach to industrial lots with a privileged location. At SIMCA, we have more than two decades of experience in the market, backed by more than 27 completed projects; we're a company that always focuses on our clients' needs, studying the environment, and offering the best quality and design.
You may be interested in: SIMCA’S Top Secrets or Why We Offer the Best Real Estate Options
FAQs
The owners of such properties will not agree with those who say that the structural changes in the industry have turned real estate into a commodity. Commodities have uniform characteristics, making them fungible and therefore easily traded. But in real estate, it is the difference that counts.
Is property considered a commodity? ›
Property rights are fundamentally commodities which can be bought and sold. Human rights are not.
Is housing considered a commodity? ›
Known as the financialization of housing, the phenomenon occurs when housing is treated as a commodity—a vehicle for wealth and investment—rather than a social good.
Is land considered a commodity? ›
Land can be used as commodity money. This is because the land itself has intrinsic value that can be leveraged in the economy. Particularly, in the 21st-century economy, land is becoming a highly valuable and marketable commodity. In history, along with labor and money, land was considered a fictitious commodity.
What are house commodities? ›
Commodity housing refers to the properties developed by qualified real estate developers and could be freely leased out or transferred in the market. Commodity housing not to be further transferred in 3 years upon obtaining individual ''Real Estate Title Certificate'' II.
What classifies as a commodity? ›
Commodities are raw materials used to create the products consumers buy, from food to furniture to gasoline or petrol. Commodities include agricultural products such as wheat and cattle, energy products such as oil and natural gas, and metals such as gold, silver and aluminum.
What are the two properties a commodity? ›
Properties. In terms of economics, a commodity possesses the following two properties. First, it is a good that is usually produced and/or sold by many different companies or manufacturers. Second, it is uniform in quality between companies that produce and sell it.
Which is not a commodity? ›
An automobile is not a commodity. A commodity is a raw material or primary agricultural product that can be bought and sold, such as crude oil, cocoa, and coffee. An automobile is a finished product that is manufactured and sold to consumers.
What type of assets are commodities? ›
The Bottom Line
Commodities are basic goods and materials that are widely used and are not meaningfully differentiated from one another. Examples of commodities include barrels of oils, bushels of wheat, or megawatt-hours of electricity.
What does it mean when land becomes a commodity? ›
People who own built environment such as a house on a piece of land see land as a resource to appropriate rent. People who could be broadly classified as workers view land as a commodity to be consumed, for example, housing for the urban poor.
(1) Definition of domestic commodity or product In this subsection, the term “domestic commodity or product” means— (A) an agricultural commodity that is produced in the United States; and (B) a food product that is processed in the United States substantially using agricultural commodities that are produced in the ...
What all comes under commodities? ›
Commodities are often split into two broad categories: hard and soft commodities. Hard commodities include natural resources that must be mined or extracted, such as gold, rubber, and oil, while soft commodities are agricultural products or livestock, such as corn, wheat, coffee, sugar, soybeans, and pork.
What is a commodity vs non commodity? ›
Key Takeaways. A commodity is a raw material used in the production process to manufacture finished goods, while a product is a finished good sold to consumers. No value is added to a commodity, which can be grown, extracted, or mined.
Why is housing commodified? ›
The acceleration of the commodification of housing—driven in large part by the promotion of individual homeownership, disinvestment in public and subsidized housing, and the subsequent rise in speculative activity—has led to unprecedented levels of housing insecurity.
What would be considered commodity money? ›
Commodity money has been used throughout history as a medium of economic exchange. Commodity money is money that has intrinsic value, meaning that it has value even if it is not used as money. Examples of commodity money include precious metals, foodstuffs, and even cigarettes.
