Seeing how we’ve started looking at data from last year, I thought it would be interesting to look at global home prices as of Q4 2015. Here’s a chart from Knight Frank, which they refer to as their Global House Price Index:
At the top of the list is Turkey, with an 18.4% increase from Q4 2014 to Q4 2015. (Supposedly this is because it has recently become easier for foreigners to buy property in the country.) Canada is 13th with a 6.2% increase (during this same time period) and the United States is 17th at 5.4%.
This is obviously a high level analysis. There are lots of regional and local variations within each country. For instance in Canada right now, Calgary is a very different place than, say, Vancouver or Toronto.
Nonetheless, it’s still valuable to see the relative performance of each country and see what their (Knight Frank’s) prediction is for 2016:
“Our outlook for 2016 is muted. We expect the index’s overall rate of growth to be weaker in 2016 than 2015. The global economy is experiencing a potentially dangerous cocktail of low oil prices, a strong [US] dollar and a continued slowdown in China.”
It’s also interesting to see how the countries rank in terms of affordability:
Once again, Canada ranks as being one of the least affordable countries in terms of home prices.
Two of my favorite things are snowboarding and cities.
So the 4K GoPro video below, called Japan Snow - The Search for Perfection, really does it for me.
The video is the journey of two GoPro athletes as they go from Tokyo to Hakuba (a village near Nagano, host of the 1998 Winter Olympics) to the northern island of Hokkaido in search of untracked powder. If you’re a snowboarder or skier, you’ll of course appreciate that journey.
For you urbanists, the city shots are incredible. I also love how they describe Tokyo as a “sophisticated web of innovation and tradition.” I often describe Tokyo in a similar way, but I like their wording better.
Make sure you full screen this video and turn on your sound. It’s about 14 minutes short. Enjoy.
[youtube https://www.youtube.com/watch?v=tXpXHoDKL64?rel=0&w=560&h=315]
As further evidence that real estate is a local business, let’s take a look at the housing market in Japan today. It’s a very unique market.
According to this Freakonomics podcast, 50% of all single family houses in Japan are demolished by the time they reach 38 years old. That’s their half-life. By contrast, in the US, this number is 100 years.
The reason for this is rapid depreciation. Real property typically consists of two things: land and the building. Land doesn’t depreciate. But the structure sitting on the land does.
In Japan, the building or structure is thought to be fully depreciated (and therefore worth nothing) after about 30 years for a single-family home and after about 40 years for an apartment/condominium.
The result is that there’s virtually no resale housing market. When somebody buys a house, it is usually torn down and completely rebuilt. It’s a uniquely Japanese phenomenon.
So why does this happen?
The Freakonomics podcast presents a couple of hypothesis. Some believe that it’s caused by a Japanese fixation with newness. New is seen as pure and clean.
Others believe that it has to do with a building code that is constantly changing due to the high frequency of earthquakes in Japan. 20% of the world’s earthquakes with a magnitude of 6.0 or greater happen in Japan. And so there appears to be a belief that newer homes – with the latest seismic technologies – are the safest.
Whatever the case may be, the fact that there’s virtually no resale housing market in Japan, not surprisingly, produces some interesting outcomes. For one, maintenance and DIY home projects are uncommon. Why invest in your home when it’s not viewed as an asset, but as a disposable good?
At the same time, people worry very little about marketability when they are building new. And this is a big reason why Japan is so famous for its radically designed homes. When you’re building only for yourself, you just do what you want.
But most importantly, some (such as Richard Koo, who is interviewed in the podcast) believe that this approach to housing is a huge “obstacle to affluence.” Without a functioning resale market, the Japanese don’t get the opportunity to build wealth/equity in the same way that other countries do.
Do you buy that?