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Least affordable homes : Who wins? Explanations?

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Least affordable homes : Who wins? Explanations?

1-HK, 2-Sydney, 3-Vancouver, 6-London, 15-NY

==================================

 

HK Way ahead of rivals for severely overpriced homes - says SCMP today

City property far less affordable than in wealthy English speaking cities

 

Property affordability in cities with populations over 1 million

Rank : City========= : Multiple (mean multiple to income)

# 1 / : Hong Kong -------- : 11.4

# 2 / : Sydney, Australia--- : 9.6

# 3 / : Vancouver, BC Can. : 9.5

# 6 / : London, England UK : 7.2

#15/ : New York City, USA- : 6.1

#30/ : Dublin, Ireland ------ : 4.8

#48/ : Ottawa, Ont. Can. -- : 3.6

#82/ : Atlanta, Georgia, USA: 2.3

 

"Affordable" homes are said to cost three times annual income or less, says article

 

This is the first time HK has been included in the survey, by Demographia, which looked at affordability in six English-speaking countries:

Australia, Canada, Hong Kong, Ireland, New Zealand, the UK, and the US.

 

Only one city (Los Angeles) exceeded HK in the seven years that the survey has been produced.

 

Where the cost is above 5.1 times incomes, property is considered "severely unaffordable" by the report.

 

Home prices in HK have surged more than 50 percent in the last two years.

 

All the affordable major markets - with home prices below 3x were in the US. Prices there are expected to fall further, as homes in foreclosure is expected to rise in 2011. A record 2.87 million properties got notice of default, auction, or repossession in 2010.

 

HK's rising property prices have become one of the city's leading economic and political concerns, with a growing number of the city's residents saying they can no longer afford the city's runaway housing prices.

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THESE COMPARISONS IGNORE :

 

HK's ultra-ultra-low interest rates (1% mortgage rates are now taken as normal), low income tax rates (maximum tax rate is 16% and over half of HK's workers pay no tax), and its low transportation costs (you can live comfortably in HK without a car.)

 

If you adjust for these items, housing is more affordable in Hk than in truly unaffordable locations like: Sydney, Vancouver, and London.

 

... from the NyLonKong thread ...

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I also noticed they must have used average income for the area and included unemployed. This is a guess as I read this via my online news site. They stated that the city of Atlanta had the "most affordable" housing in the US. But they don't mention the really run down areas such as Detroit where a house would be significantly lower in cost, in some cases basically free. This is why I think it must be averaged.

 

The fact is that it isn't that house prices are driven up in price due to the number of buyers being more than the number of sellers. . .

 

Actually it is how keen buyers are vs how keen sellers are that will give you are market price. When the public FINALLY realise that owning a house can be more of a liability at time than an asset only then will the lack of appeal of home ownership drive down the price. The end of cheap credit will be painful in the same way that giving up heroin is but in the end it is better for us all.

 

 

 

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...they don't mention the really run down areas such as Detroit where a house would be significantly lower in cost, in some cases basically free. This is why I think it must be averaged...

Homes are not free in all of Detroit.

My parents live in a suburb of Detroit, and condos are rather pricey there: like $300 - 400k for 1,500- 2,000 sf, or more

 

Where homes are $100, there's back tax to pay, and many of your neighbors may have no jobs, so the Price to Income is infinite.

 

"At $61,400 the median income home price in Saginaw, Mich. was 1.6 times the median income of $39,500. Saginaw was ranked no. 1 for affordability."

 

= =

 

Comments in the WSJ today talk about how unrealistic the assumptions are:

 

(hong Kong's) "Centaline criticised the methodology as 'too simplistic', casting doubt on the validity of results.

'It doesn't have the most important factor: mortgage rates.'

. . .

Overall, Hong Kongers mortgages come to 36% of their income, according to data from Midland Realty."

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Have just started to look at investment properties in the USA. There can be little question that some markets - take Atlanta for example - at 2.3 times median household income and prcies back to January 2000 levels are cheap and investors can drive further bargains from the foreclosure process. However case shiller expects prices to go lower from here and I would not be surprised to see gross yields of up to 40% in places like Atlanta before this is finally done with prices maybe falling back to 1997 or even further levels. In these markets cash is king and the opportunity for investors to acquire a long term stable cash flow is very possible. Having said that there are few opportunities to gear and risks aplenty - from unemployment, tax regime changes, levels of vacant stock etc. Equally there is no doubt that when prices become fundamentally cheaper than building as they are now doing so in many US markets this tends to be characterised by the bottoming of a market and the beginning of a new bull market as bying becomes considerably cheaper than renting.

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