I've been travelling a fair bit since the world emerged from covid (US, France, Spain, Thailand) and one thing these and other countries have in common are pretty outrageous real estate prices, and I'm wondering, who in the hell can afford $5-10M properties? Because everywhere I've been, there are quite a number on the market and some areas have nothing under $2M. I bought a 2500 sq ft home in the SF Bay area in 2009 for $765k, sold it in 2019 for $1.7M and found out it's now worth $2.1M. With that in mind, my price bracket for a 1000 sq ft retirement apartment with a terrace and a water view has been around $1M. Forget it! $1.5M is a starting price, even in Thailand. Sydney harbor view apartment? $2.5M French Riviera apartment? $1.5M The joke... Monaco 270 sq ft studio no view? $1.3M.. Mallorca? $2M While perusing for apartments I could see starting prices for 2000-4000 sq ft villas with sea views starting at $4M in Mallorca, $2.5M on France's "poor" coast, $5M on the Riviera, $20M in Monaco, $5M in Sydney... With an average income of $9k/month after tax, American labor is one of the highest paid in the world, primarily because most everything comes out of pocket. In Europe, avg wage after tax in the wealthy countries is around $2.5k. Clearly, no average income can afford any of these types of apartments or houses. These properties are enticing the 1 percenters, the 60+ years old executives, the 30 something techies, artists and athletes. My guestimate is the Euro market is limited to about 350,000 individuals, including about 100,000 non European. That's not a small number, even if Europe has quite a long desirable coastline. Does this mean I'm just a wannabe, that all the money I've made trading in the last 3 years, many others have made much more of? Did I not beat the rat race with a ? Maybe I do want to see the real estate market crash and burn
Last year, here in the UK, I was seeing five year interest only fixed rate mortgages at 1% . Required 40% down. So 2million place, 800K down, 1.2million payment was just $1000 a month payment. 800K deposit by selling existing place. Would be screwed when fixed period ending and interest rate jump from 1% to 5%. Because interest only payment would jump 5x. But early last year it felt like central bank interest rates would be 0.1% forever. Nephew and wife on average wage took (5K a month combined) took a 40 year, 5 year fixed rate of 2%, bought 500K place six months ago with 10% down. Repayment mortgage is fixed for 5 years at 1400 a month payment. They will be hoping interest rates are back down by end of 2026, when the fix expires. But if their mortgage rate is 6% in 2026, they will see current repayments jump to 2500 a month, from 1400. 25 year repayment mortgage would have been £1940 a month. But they took 40 year mortgage for £1400 a month. They told me nearly every first time buyer is taking 40 year mortgages these days.