Priced Out: Liquidity Is Also Causing Global Real Estate Prices To Rip – Forbes

It’s not just low interest rates and low inventory, it’s global liquidity.

That means that if you thought buying a house was hard pre-pandemic and felt priced out, these last few months have done absolutely nothing for you. It’s a seller’s market. Not just in Florida and Massachusetts, but across most of the world.

I have a friend who is renting a house in Panama. And while Panama was always pretty expensive because it is dollarized, the rent there for two bedrooms was double my mortgage.

My brother is looking for a house in Massachusetts. I went with him a few days ago to look at an Open House. There were at least five couples waiting to check it out. The broker tells me that it will go for at least $25,000 over asking and it was under 1,000 square feet and the master bedroom had no bathroom and…no closet! What is this, New York City? Tokyo? San Francisco?

In a world awash with liquidity and Bitcoin riches, everyone is buying real estate right now just to put their money somewhere. A lot of the buyers are second home investors.

Low inventory here and elsewhere is also pushing rents higher at precisely the wrong time.

“In Sao Paolo, the rental housing prices rose by an average of 3%, the biggest year over year rise in almost five years,” Rentberry CEO Oleksiy Lubinsky tells me in an email.

Over the past month, on the Rentberry website, the average rent for a studio apartment in New York — locked down and facing protests that only recently ended — increased by 8% to $2,150. The average rent for a 1-bedroom apartment increased by 6% to $2,490 in a city with nothing happening.

“Miami saw a mostly upward trend in the rental market, too,” Lubinksy says, adding that one-bedroom rentals increased by 2.3%. Overall, Miami rents continue to rise, making the city the 8th most expensive place to rent, according to Rentberry data. The website is like a global search engine for rental and residential/commercial property worldwide.

If you wanted to know, rent is up 8.7% in St. Petersburg. No more masks. It’s like the Florida of Russia now, by the looks of its housing market and its “over it” attitude regarding SARS2.

Here at home, housing prices have soared throughout the pandemic. That’s fine for those looking for equity loans, or selling. It’s helped push people’s wealth to record highs as housing is always a key part of an Americans core assets. All of this points to a strong economic recovery in 2021, but it does not bode well for renters and house hunters who are priced out.

The price of a median single-family home is up slightly more than 15% in less than 12 months in the U.S., according to the National Association of Realtors.

“A typical homeowner in 2020, just by being a homeowner, they would have accumulated around $24,000 in housing wealth,” Dr. Lawrence Yun, a senior economist at the National Association of Realtors, was quoted saying by ABC News last week.

Global demand is booming due to low interest rates. That’s another thing that’s pushing prices through the roof.

No House Flipping In China

People in several major Chinese cities signed more rental contracts than usual over the Lunar New Year break, according to the subscription service of Caixin Global, a China business daily.

The total number of rental contracts it facilitated in 18 cities hit a six-year high.

Average monthly rents in the cities climbed to 61.7 yuan ($9.53) per square meter, representing a 6% increase from the week prior. The 18 cities include the country’s four biggest municipalities — Beijing, Shanghai, Tianjin and Chongqing.

Some China cities are taking restrictive measures to crack down on real estate speculation amid surging housing prices. People have so much money, they don’t know where to put it other than third and fourth homes.

Housing authorities in the eastern China city of Hangzhou actually banned buyers of new residential properties from selling out within five years. Despite a series of restrictions, housing prices started 2021 in China at record highs.

In Brazil, the residential market has been recovering for the past four years, driven by low interest rates for home buyers. As a result, home builders have successfully tapped capital markets for resources that are now being deployed into new houses, focused on the upper middle segment in southeastern Brazil, according to a report by Imeri Capital.

I’m looking to buy in the southern state of Santa Catarina, actually. Brazil is great right now for expats and foreigners looking for tropical vacation homes. You can buy half a million dollar properties for under $150,000, though for that you will need to speak the language and deal with the local brokers and sellers otherwise you’re getting soaked with “gringo pricing”.

Unprecedented low inflation and interest rates present real estate investors with a macro backdrop that favors real assets. Property markets have been recovering faster than rental markets, including in hard-hit economies like Brazil, but have not peaked yet. Cap rate spreads remain high despite economic slowdowns and restrictions in Brazil and elsewhere.

One of the biggest standouts in the opposite direction has been India. They’ve been one of the hardest hit by the pandemic and their housing market has done poorly.

According to Knight Frank, housing sales in the top 8 Indian cities fell by a massive 54% year over year in the summer months to a decade low. New homes built also fell by a sharp 46% to 60,489 units in those cities, though that is picking up now. These numbers from Knight Frank are from July. I suspect India is turning the corner and joining the party.

If you’re looking for a place in Mumbai, Rentberry has a 2,390 square foot 3 bedroom, 3 bath house going for — get this — $879,865!

I’ll take Les Pelicans in Miami for half the price. Then again, it is half the size.

Forbes contributor Ellen Paris, who writes about real estate, says the last few months have been like “Groundhog Day” for real estate.

Home price growth in the U.S. ended 2020 at their fastest pace in eight years. The results top off what was a record year for the housing market despite the pandemic, Amanda Fung from Yahoo! Finance reported on February 23.

The S&P CoreLogic Case-Shiller national home price index rose 10.4% in December versus a year ago and rose 9.5% from November. The 20-City Composite rose by 10.1% in December, up from the 9.2% gain in November. That beat consensus estimates.

Rentberry’s Lubinksy says that — by looking out the window in his offices in San Francisco — its the old, tired story of Silicon Valley riches pricing out the riff-raff.

“The steady rise of income for tech workers is the key factor driving an overall increase in home prices and sales in the Bay Area,” he says. “Based on the data we have, we predict 2021 home prices will grow around 5% in the U.S. The correlation of the strong stock market and the continued increase in home prices is a global phenomenon at the moment,” Lubinksy says.

Global real estate investors looking for rental property will bring the same liquidity to prime real estate in countries throughout the Americas, for example, making it harder for new families to buy a home as price spikes have no end in sight. A stronger dollar is helpful to American buyers, but this window could be closing in Brazil and elsewhere. And although it is closing, I don’t expect the Brazilian currency, for instance, to head to four to one anytime soon. It is still trading over 5.30 to the dollar.

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