On Friday, we looked at how much maintaining a Monarchy costs. We took a peek at what the four largest countries pay, and it’s not exactly cheap. In exchange, Commonwealth countries theoretically receive a better quality of life. We thought we’d look at the numbers behind the quality of life claim. Today we’ll look at real estate prices, and the massive bubble that may be forming.
Real estate prices are soaring across the whole realm, relative to local currencies. Unfortunately, most of the countries in the realm have unreliable data sets to compare. So we’ll take a look at Canada, New Zealand, Australia, and the UK – and how real estate prices have been moving.
Prices Are Soaring
Prices are rising fast. From 2003 to 2016, prices went up on average 71% – substantially higher than the 47% seen in the US. Shocking when you consider that the US had one of the largest real estate bubbles in history during the same period. We already knew Canada is putting the US bubble to shame, but we didn’t know that real estate prices in Australia, the UK, and New Zealand were getting pretty frothy too.
Of the four countries we compared, the most expensive place to buy a home is Australia. In Australia, your average home price rose 65% from 2003 to AUS$623,000 (US$475,165). While that’s steep, the highest price increase was in New Zealand, where prices rose 84%. The average home there will now cost you NZ$612,527 (US$443,797). Heck, even the UK, which had the worst return in local currency, received a 55% increase in prices.
None of these places could pin down what exactly is causing prices to rise so quickly. We did notice that local media kept comparing the cities to Manhattan. Okay, maybe people are optimistic about Vancouver, Auckland, London, and Sydney’s property markets. However, as I kept reading, they all were developing a “Manhattan” – including Papa New Guinea. If your bulls**t alarm didn’t go off, check the batteries.
Are They Going Up?
Obviously everywhere can’t produce a Manhattan. Heck, even Manhattan’s real estate prices aren’t rising this quickly. So we adjusted all home prices for inflation and converted them to a universal currency – the US dollar.
What we found was that prices aren’t going up nearly as fast as they are in local currencies. New Zealand’s massive 84% gain was trimmed down to only 11%. The UK actually dips below the 2003 price when adjusted. Prices rose the most in Canada, but more in line with the US – only 47%. While not terrible, these aren’t the outrageous returns you’re hearing about locally.
Currency devaluation seems to be a large part of why prices are rising so quickly. If you’re paid in USD or yuan, most of those homes are becoming more affordable by the day. This is probably why foreign buyers are popping up so rapidly in Canada, New Zealand, the UK, and Australia. Homes are becoming a better value in the Commonwealth than can be purchased in places like China and the US.
Although, this brings up an interesting question we’ll look at later this week. If prices are rising so rapidly in these countries, are wages doing the same? If not, what we might be seeing is a crunch that will end very badly for domestic buyers.
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