Last week the Economist published several articles and graphic analyses regarding home price appreciation around the world. The interactive graphics are pretty cool because they allow you to compare US home price appreciation to the appreciation in many different countries using 5 different metrics.
I’ve embedded one of their graphics below but because this blogging platform has a pretty narrow column width using it is a bit clunky. Therefore, I suggest you go to the original source if you really want to play with this data: Daily Chart: Global House Prices.
First of all I would recommend that you focus on the Prices in Real Terms as opposed to the House Price Index simply because different countries have different inflation rates and you don’t want that skewing the results. And to include the United States in the results you can’t start any earlier than Q1 of 1975.
When you do all that you will see that Britain and Australia home prices have more than tripled in real terms in that time period while US home prices only went up by 59%. And recently New Zealand home prices have been on a tear.
Does that mean that home prices are more affordable in the US than in these other countries? Well, you can’t tell that directly from these graphs but you can tell where they are relative to their historic average and which direction they’re moving in if you switch to the Prices Against Average Income mode. For the US home prices relative to income are actually a tad under their long term average while many of the other countries are well above it (Germany is an exception). New Zealand, Australia, and Canada are some of the worst at around 50% above the long term average.
In a similar vein home prices relative to rents have gotten out of whack in both Canada and New Zealand. If I’m interpreting the data correctly that would mean it’s likely cheaper to rent in those countries than it is to buy – by a long shot.
Unfortunately, if you move back and forth between the different metrics and start comparing the numbers it looks like the data isn’t exactly consistent from one metric to the next. Not sure what to make of that but I assume that the information is generally correct within an order of magnitude.
The Economist published another article on how foreigners searching for sanctuary are responsible for the exploding prices in these countries. They point to the Chinese as one of the primary sources of buying power but apparently Americans are in the mix also. In fact, they claim that American interest in New Zealand has tripled since Donald Trump was elected.
The Economist also produced a similar graph to the one above for more than 20 US cities late last year: America’s Housing Market In Five Interactive Charts. The charts are based upon Zillow data so I’m a little bit suspicious of their accuracy. However, setting that concern aside for a minute the data shows that Chicago home prices in real terms are relatively inexpensive compared to other major urban areas and haven’t really gone anywhere since 1980 – unlike San Francisco and LA.
Gary Lucido is the President of Lucid Realty, the Chicago area’s full service discount real estate brokerage. If you want to keep up to date on the Chicago real estate market, get an insider’s view of the seamy underbelly of the real estate industry, or you just think he’s the next Kurt Vonnegut you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.