| | | Tejek,
I enjoyed your thoughts very much and would like to explore them further as I believe indentifying new trends is the key to profits in Real Estate. I think we can accept as fact that most big City Real Estate has appreciated since the 2006-7 bust, more than RE in rural or suburb locations not only in the USA but worldwide. What we need to determine is-Why? And is it a trend that will continue.
As I interpret your theory it breaks down to Millennials and a shifting of affinity of the people towards big city living over the last several decades. According to demographic numbers Millennials account for only 23% of the population most of whom are not in their peak earning years and are more likely to be renting. On the other hand, there are approximately the same number of baby boomers who are in peak earning or retiring. One could argue that the boomers would move away from the big cities once they retired to escape the higher cost, rents, etc. This would more than offset the Millennials moving in.
Of course, the idea of people liking the big City's could be a result of the appreciation too. Much like people flock to a rising stock market. The stories of people buying a house or apartment in Manhattan, San Fran, or London and selling it a year or two later for $250,000. more than they paid for it tends to attract new players. I tend to think this is one of the factors, especially with the very generous tax break of $500,000 in the US for owner occupants. Where else can you make a profit like that tax free?
Perhaps the "hot money" theory has merit in places like London, one could see how Greeks may fear stringent taxes and money controls so buying in London in stirling would be a hedge, ditto the French running from the socialist taxes to safe haven London but that would hardly explain why Moscow or Shanghai is so pricey. Ideas?
Looking forward to more debate and discussion in this area.
Regards,
R. |
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