condo price

U.S. and International Housing Prices: U.S. a Good Buy

Foreigners buy houses in the United States for a variety of reasons:  vacation, investment, rental, asset diversification, primary residence, and other purposes. With the dollar gaining strength against foreign currencies and inventories of available properties decreasing as prices increase, foreign buyers are finding U.S. properties becoming increasingly expensive.

Are properties in the United States still a “good buy” relative to prices outside the United States?  The answer is “Yes.”  Although house prices are highly variable, depending on location condition, and amenities, U.S. prices appear to be reasonable when compared to foreign properties.  For example, a comparison of condo prices shows that for many foreigners U.S. real estate appears to be lower cost.

When comparing prices it is important to compare “apples to apples”.  The cost of a 120 square meter foot condo was compared for a number of foreign cities based on prices reported in Global Property Guide against the median price of a condo in U.S. cities.  This is a rough approximation:  U.S. and foreign properties can be significantly different in terms of property characteristics, amenities, and buyer expectations.  In addition, foreign buyers on average tend to purchase prices approximately valued at twice the U.S. median price.  However, U.S. condo prices appear to be quite competitive with foreign prices and expectations.  The graph compares U.S. prices relative to Toronto, Shanghai, Mumbai, London, and Mexico City.

The April 18th issue of The Economist also indicates that U.S. home prices tend to be attractive relative to foreign prices.  The Economist indicated that U.S. prices relative to income were 11 percent undervalued– compared to Britain and Sweden (27 percent overvalued), Australia (39 percent overvalued), Canada (35 percent overvalued), and France (25 percent overvalued).  Countries undervalued included Germany (11 percent undervalued), South Korea (30 percent undervalued) and Russia (21 percent undervalued).  In terms of rents The Economist showed that the U.S. provided better value than did Canada, Britain, Mexico, and China, among others.

condo price

 

What Does This Mean For Realtors?

A typical foreign buyer probably will not face “sticker shock” when considering a U.S. purchase.  However, there are many other aspects of a U.S. house purchase which may be unfamiliar to foreigners.  U.S. property taxes, condo fees, real estate laws and regulations, and ways of doing business may be substantially different from those with which the potential foreign purchaser is familiar.  Just as U.S. citizens find foreign practices in experiences very different form their home country, the same is true for foreigners.  REALTORS® can provide value-added by educating the foreign buyer in terms of differences between U.S. and foreign real estate practices and expectations.

Jed Smith, Managing Director, Quantitative Research

Jed Smith is Managing Director, Quantitative Research with the National Association of Realtors®. He has worked on real estate issues for the past 20 years, providing input on a variety of housing, commercial real estate, tax, and planning issues. Recently he has been involved in several international studies.

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