Transparent Global Real Estate Analysis

(excerpt from Transparent Real Estate)

Following up on my post on how South Korean government policy is adversely affecting its housing market, I came across Global Property Guide ("GPG") from a kind referral by its publisher Matthew Montagu-Pollock. This is a statistics filled site that analyzes property markets by country and explains how government policy, market forces and culture affect housing. GPG serves as an invaluable resource towards taking steps in creating standards in investment protocol across the global marketplace.

Here are a few intriguing examples of their work:

How to Spot Housing Market Bubbles

Using four criteria below, GPG sets financial standards for global home price evaluation:

Price to Rent Ratio (or Yield) - Analogous to the Price to Earnings ratio commonly used for evaluating stock prices, this index in essence measures the ratio between financing costs and gross rental income, or more simply are rental investments "cash positive" or "cash negative"?
Relative Prices - Moscow's real estate prices are dramatically higher than anywhere in Eastern Europe, yet their standards of living are similar... these anomalies are factored.
Affordability - How much housing can an average paycheck afford? In Europe, a rich country like Belgium have housing prices similar to those in Eastern Europe and could be considered higher potential investment market.
Price to Replacement Cost - Developers build houses when housing prices are higher than building costs. However, runups in housing prices as seen in the US sparked building activity resulting in surplus inventory that, as cycles go, places downward pressure on prices. Governments like France with institutionalized building restrictions that limit housing supply will generally maintain housing prices above construction costs.

Here's one of several graphs that suggest Eastern Europe has attractive yields for investment purposes:

EASTERN EUROPE YIELDS ARE HIGH

Read more of the article explaining why internet powerhouse South Korea has a high proportion of urban slums, and how Leftist politics impact real estate in Latin America at Transparent Real Estate.

--Pat Kitano

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