Historical data relating to the appreciation of real estate property values throughout the years has always been very comforting. In fact, housing has appreciated consistently an average of 7.5 percent per year over the past 30 years in Canada [source: Canadian real Estate Association], and an average of 7 percent per year in the United States over the same span of time [source: National Association of Realtors]. Which goes a long way to prove how sound real estate is as a wealth-generating vehicle, notwithstanding the several ups and downs the industry has gone through in both countries.

The economic explanation of this brilliant and consistent track record is relatively simple. Housing supply is produced using land, labor, and various inputs such as electricity and building materials, with the quantity of new supply determined by the cost of these inputs, the price of the existing stock of houses, and the technology of production. As real estate is a fixed and durable commodity and the land underneath is practically indestructible, real estate markets are modeled as a stock-over-flow market. About 98 percent of supply consists of the stock of existing houses, while about 2 percent consists of the flow of new development.

What drives the accumulation of wealth in real estate is the perpetual search for more surplus-value, that is the amount of the increase in the value of capital upon investment, i.e. the yield regardless of source or form. This is by no means unique only to real estate, as stock markets spin around the same principle as well. The difference, however, consists in the fact that real estate markets employ one economic variable that is entirely missing from stock markets: labor.

Real estate requires a constant supply of labor force, which can conserve and add value to inputs and capital assets, and thus create a higher value. The rationale behind this is that labor adds value by satisfying demand through production, since when people acquire income they tend to invest it, and the more people that acquire income the more people that tend to invest it. Therefore, there is a correlation between capital and employment in real estate or, if you will, between income and labor. An increase in levels of consumption sets forth an increase in prices caused by a corresponding increase in demand, in itself generated by a commensurate increase in the income-employment factor.

It follows, therefore, that real estate growth and appreciation of real capital assets are derived by the equilibrium of capital and investment with labor and employment, which is a characteristic unique to real estate. Which, then, explains the consistent track record of real estate as a wealth-generating venue. And which, moreover, further explains why