What people mean by a real asset

‘Real asset’ is used to separate a physical thing, or a long right over one, from a claim that is only a promise to pay currency units. The separation is useful. It is also regularly stretched until a fund, a share, and a flat are treated as the same object because one adjective was asked to cover all three.

Hold the layers apart. Land and buildings are non-financial assets in the place where they stand. A mortgage is a financial claim on the owner. A listed property company is a claim on a corporation, with management, leverage, and other shareholders in between. Buying the company is not the same decision as buying the building, even when the company owns little else.

The accounts already refuse the shortcut

The IMF’s guide to direct-investment surveys states the statistical convention plainly: if a non-resident would not otherwise be a resident unit, a notional resident unit is recognised so that land and buildings stay assets of the economy where they are located. The non-resident is treated as owning equity in that unit. A cross-border ‘real’ holding is, in the accounts, a financial relationship. That does not change who has the keys. It does warn against treating a foreign building as an object outside finance.

Price is a second warning. The handbook on residential property price indices, and the BIS series built in that tradition, exist because there is no single price of housing. Quality, location, and the mix of what sold all have to be handled before a number means anything. This page does not quote those series. It uses them to refuse a vaguer claim: that ‘property’ went up, therefore a particular asset is a real store of value.

Condition, regulation, and vacancy still apply. A flat in England under a wasting lease, a Malaysian title that needs state consent, and a Philippine condominium interest sitting under a land regime foreigners cannot freely enter are three different real assets. The adjective does not survive the trip.