World Out Of Whack: What’s Next For Global Real Estate?

But the US isn’t the world, so let’s look at what everyone else has been up to.

Take a look at this:

In the British empire and all its former colonies the inmates pretty much trucked on after a short “uh-oh” moment:

“Did you see that Bobby? Blimmin Mary reckons the place down on the corner only fetched a million quid.”

“Musta been a steal laddie, it even had a fence. Reckon we ought to get out and buy already.”

And so they did as we can see.

In truth, it hasn’t just been Mr. and Mrs. Smith in their tweed coats buying up UK properties, just as it hasn’t been Sheila and Bruce in Sydney, or even Maple and Hudson in Canada. A significant amount of buying power in these markets has come from offshore buyers, largely frightened Chinese money being parked. It’s pretty extraordinary, really.

Prices alone don’t provide us with the entire picture or provide us with context. I mean, real estate prices in Harare went through the roof, too, in the 2008-09 period (in ZWD) but the currency went through the floor and real purchasing power collapsed. Context, therefore, is important.

Also, clearly a swanky penthouse in Manhattan overlooking the Hudson river shouldn’t be priced the same as a swanky penthouse in Vientiane overlooking the Mekong. The main difference? Incomes.

So let’s take a look at prices relative to incomes for a better understanding.

Buying a house in the US actually makes a lot more sense. Certainly relative to its international peers the US is cheap. In fact, if you factor in the ability to fix debt for a ridiculously long time in a currency that’s ultimately going to get hammered, and if you need to find somewhere to live then you’ve found a way to essentially be synthetically short the bond market (provided you fix your rates). I’m not advocating this as a strategy but merely pointing out the mechanics of the trade.

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Disclosure: None.

Disclaimer: This site is not intended to render investment advice.None of the principles of Capex Administrative Ltd or Chris MacIntosh are licensed as financial professionals, ...

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