Welcome to the Real Estate Bubble Game

The real estate bubble game involves inflating property values beyond market logic, creating huge profits for banks and financial institutions. When it bursts, everyone loses. Recognize the warning signs of a bubble, and learn strategies to protect your investments, like selling, holding, or renting.“It’s important to understand the objective of any game to win, especially when the rules aren’t always clear.”

So, what’s the goal of the bubble game?

To accumulate as much real estate as possible after its market value collapses.

Who plays the bubble game?

The main players are banks and financial institutions. However, it’s a game that, knowingly or not, we all participate in.

How do we all play?

Whether you realize it or not, when you invest, you’re already involved in the bubble game. Even if no one explains the rules to you.

What is this game about?

The concept is simple: it involves inflating the value of an asset beyond any logical market value.

This inflation also drives up the cost of all the materials needed to build a home (concrete, wood, steel, etc.).

For many years, this creates exorbitant profits that distort the market balance.

An Example to Understand:

• In 2015, the average price per square meter in Tulum was around $1,000 USD.
• By 2024, the price for a Tulum apartment has soared to around $3,000 USD per square meter.
• Every year, the cost of construction materials rises above the inflation rate. In 2023, inflation was 8%, but material costs increased by at least 15%.
• Rent prices—both long-term and vacation—have risen dramatically, generating extraordinary profits.
• There’s an oversupply of properties in comparison to actual market demand.
• This leads to a decline in profitability, inability to repay loans, and a sharp drop in property prices.
• As the market crashes, banks and financial institutions acquire properties at prices below market value.

What happens when the bubble inflates too much?

Like any bubble, it eventually bursts, wiping out everything inside—including your investments.

When the bubble bursts, everyone loses.

Here’s the catch: In Argentina, there’s a game called “La Perinola,” where you spin a hexagonal top that lands on options like “Take 1,” “Take 2,” “Lose 1,” “Lose 2,” “Lose EVERYTHING,” or “Take EVERYTHING.”

A real estate bubble works like a rigged Perinola, where the only ones who always win and take it all are the big banks or financial institutions.

Can you win without being a bank in a real estate bubble?

Yes, you can—but to do so, you need to have the right analytical tools and know how to interpret them.

Warning Signs:

• A frantic pace of construction.
• Extremely low interest rates on loans.
• A society eager to acquire property.
• Revaluation of the market far exceeding the real economy.
• A sudden increase in property prices.
• Property returns compared to government bond returns.

What should you do if you identify a potential real estate bubble?

Depending on when you identify it and the type of property you own, there are different strategies:

• Sell: If you anticipate the bubble, the best option is to sell quickly. If you want to do it fast, consider pricing below market value, but still with good profit margins.
• Hold: If the bubble is already here or very close, property prices may fall below profitable values. If you don’t need immediate capital, it’s better to hold onto the property until the market recovers.
• Rent: Renting long-term can be a good strategy to maintain some returns, though they might be lower than expected. Vacation rentals are riskier, and only well-managed properties with competitive advantages will continue generating good returns.

Is it safe to invest in real estate?

Absolutely! Yes, yes, yes. Investing in land, homes, and apartments will always be the safest investment you can make. There’s no safer financial instrument. You just need to know how to do it correctly and understand how to control your risk factors.

Our recommendation is to work with a professional advisor who not only understands the current market inventory but also has the ability to analyze the market accurately.