My family is originally from Texas, although most branches have now lived in California for two or three generations. Those who remain in the Houston area aren’t shy about expressing their sentiment that despite the technically larger area of California, everything they care about is bigger (read: better) in Texas.
By that rationale, America has long been the Texas of global real estate, with our homes being built at larger sizes than new construction in other developed countries until Australia took that title a couple of years ago.
But according to an infographic recently published by Credit Sesame, American cities are the Rhode Islands (i.e., smallest) of world real estate when it comes to one measure: cost per square foot of living space.
Take Manhattan, for example, which Americans from Akron to Atlanta routinely hold out as an exemplar of blisteringly high-priced housing. The Credit Sesame chart lists Manhattan real estate at $1,068 square feet. By comparison, San Francisco clocks in at $520 per square foot, Denver at $183 per square foot, and Houston at a seemingly bargain-priced $54 per square foot.
Those New Yorkers — how do they manage it!?
Pretty easily, it seems, when you turn the comparison lens from other American cities to other world-class cities across the globe. A square foot of real estate would run you about:
- 5 percent more in Hong Kong ($1,118);
- 30 percent more in Copenhagen (1,317), Madrid ($1,395) or Helsinki ($1,366); and
- 50 percent more in Stockholm ($1,516) and London ($1,590).
And, to quote the infomercial hucksters, that’s not all — in Paris, a single square foot of real estate goes for $3,287 per square foot — more than three times as much as a Manhattan square foot! (I guess if you factor in the universal health care, maybe French real estate pencils out better. And, as an aside, who would have guessed that living in Warsaw, at $895 per square foot, would cost so much more than San Francisco, at $540 per square foot?
At first glance, this infographic tells a story about the value — and desirability — of space in these different areas, but a second and third glance surfaces additional nuance.
First, it doesn’t seem that the American cities included in the list are quite "apples to apples" with all of the world cities; American real estate values have declined more than those in many of the cities in the report.
Beyond that, it doesn’t seem that Phoenix or Houston are quite the same class of city — or even have the same population density and space scarcity — as, say, Hong Kong or Singapore. If the density of two world-class cities is not on par, then it becomes improper to compare price per square foot.
For instance, while the average price of a home in densely populated London is 333,397 British pounds (about $533,935 in U.S. dollars at the current exchange rate), the average home price in England is almost half that: 173,390 British pounds ($277,684).
So, if you consider the impact of the recent American housing crash, the much lower density of most of the American cities on the chart when compared to the international cities, and the fact that home sizes vary dramatically city to city, and country to country, you quickly see that price per square foot just doesn’t suffice to fuel a strict apples-to-apples real estate comparison.
And that, actually, holds true even here in the U.S. when comparing homes and neighborhoods. Price per square foot is a great way to track trends in home prices in a particular area over time.
But because it is so sensitive to simple space and fails to account at all for the desirability and density of location, the quality of construction, the type of transaction, or the home’s aesthetics and amenities, it’s just not a strong way to compare properties based on price, or to drive an offer price.
So, what’s it good for? Well, price per square foot is great fodder for a fun chart that makes you feel better about what you spend for housing, compared with residents of other cities and countries.