Brandon Donnelly
Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly.
Brandon Donnelly
Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly.
Last year Nolan Gray mapped out “the cities of the world where you don’t need AC or heat.” And just recently he updated his data with the help of Guardian Cities for their “sweltering cities” series. As part of the study, they projected out average temperatures, in both the summer and winter, to 2059, showing which cities may become more dependent on air conditioning. The answer looks to be many.
In his original study, Gray had 9 climatic categories, all of which were based on average high and low temperatures throughout the year. Category 1 was you definitely don’t need AC or heat. These cities are essentially perfect year round. And category 9 was you definitely need heat and AC. These cities are basically the worst places on earth to occupy from a climate perspective.
Here is that climate classification system in lovely chart form (note his caption):
The climatic utopias ended up being places like Bogotá, Guatemala City, Lima, Mexico City, San Diego, São Paulo, and Sydney. The worst places were the southeastern United States, Central Asia, and northern East Asia.
But one factor that is not included in the study is humidity, which Gray rightly points out has a meaningful impact on comfort. Toronto, for example, is classified in his system as category 7. Heat needed. But AC definitely not needed. Personally, I would bump us up to category 8: AC preferred, but not needed.
Still, this is an interesting study. There are relatively few cities with so-called perfect climates. And I have always found these sorts of climates fascinating because they empower a very different kind of relationship to outside spaces.
“The term “bubble” refers to a substantial and sustained mispricing of an asset, the existence of which cannot be proved unless it bursts.” - UBS
Last week UBS released its 2017 Global Real Estate Bubble Index. At the top of the list was none other than Toronto, followed by Stockholm, Munich, Vancouver and Sydney. And at the bottom of the list was Chicago – a city that UBS feels is undervalued.
Here is the full list of index scores:
Last year Nolan Gray mapped out “the cities of the world where you don’t need AC or heat.” And just recently he updated his data with the help of Guardian Cities for their “sweltering cities” series. As part of the study, they projected out average temperatures, in both the summer and winter, to 2059, showing which cities may become more dependent on air conditioning. The answer looks to be many.
In his original study, Gray had 9 climatic categories, all of which were based on average high and low temperatures throughout the year. Category 1 was you definitely don’t need AC or heat. These cities are essentially perfect year round. And category 9 was you definitely need heat and AC. These cities are basically the worst places on earth to occupy from a climate perspective.
Here is that climate classification system in lovely chart form (note his caption):
The climatic utopias ended up being places like Bogotá, Guatemala City, Lima, Mexico City, San Diego, São Paulo, and Sydney. The worst places were the southeastern United States, Central Asia, and northern East Asia.
But one factor that is not included in the study is humidity, which Gray rightly points out has a meaningful impact on comfort. Toronto, for example, is classified in his system as category 7. Heat needed. But AC definitely not needed. Personally, I would bump us up to category 8: AC preferred, but not needed.
Still, this is an interesting study. There are relatively few cities with so-called perfect climates. And I have always found these sorts of climates fascinating because they empower a very different kind of relationship to outside spaces.
“The term “bubble” refers to a substantial and sustained mispricing of an asset, the existence of which cannot be proved unless it bursts.” - UBS
Last week UBS released its 2017 Global Real Estate Bubble Index. At the top of the list was none other than Toronto, followed by Stockholm, Munich, Vancouver and Sydney. And at the bottom of the list was Chicago – a city that UBS feels is undervalued.
Here is the full list of index scores:
I’m on a flight right now reading the latest issue of Monocle Magazine in a seat that barely accommodates the length of my femur. This month’s issue has their annual ranking of the top 25 cities in the world.
Munich is first, which is not unusual for their ranking methodology. It generally scores well. Quality of life is high. Crime is low. The economy is strong. Beer gardens are fun. And you’re close to the Alps for snowboarding.
One stat that caught my attention — and it’s not included for all of the cities — is the number of homes built in the past year. Presumably this is all housing units in the metro area — for sale, for rent, subsidized and so on.
Here are their (clearly rounded) numbers. The order is as they appeared in the ranking, but again, not ever city included this stat.
Munich: 8,300
Tokyo: 150,000
Copenhagen: 5,000
Berlin: 11,000
Madrid: 1,600
Hamburg: 7,000
Melbourne: 5,100
Helsinki 4,400
Stockholm: 7,000 (18,000 in Greater Stockholm)
Sydney: 39,000
Hong Kong 17,000
Vancouver 22,600
Amsterdam 5,100
Kyoto 8,900
Dusseldorf 2,600
Barcelona 1,000
Some of these numbers appear to stand out, such as the counts for Tokyo, Sydney and maybe Vancouver. But it’s hard to draw any conclusions around housing supply and housing affordability.
Melbourne and Amsterdam allegedly have the same number of homes built over the past year, but according to Monocle the metro areas of Melbourne and Amsterdam have populations of 4.85 million and 2.4 million, respectively. This also says nothing about their growth rates.
So which one is doing a better job of addressing housing demand? I’m not sure.
But it was still interesting to see that Tokyo delivers somewhere around 150,000 homes a year. Tokyo is somewhat unique globally in that it’s a big city — one of the biggest — that somehow manages to gracefully balance both scale and quality of life.
Photo by Elias Keilhauer on Unsplash
The UBS index is a weighted average of the following five sub-indices:
Price-to-income
Price-to-rent (fundamental valuation)
Change in mortgage-to-GDP ratio
Change in construction-to-GDP ratio (economic distortion)
Relative price-city-to-country indicator
If you look at their price-to-income benchmark in isolation, Toronto drops down to the middle of the pack along with Geneva and San Francisco. Hong Kong, London and Paris sit at the top with the most unaffordable housing.
Still, UBS credits “an overly loose monetary policy”, foreign demand, tight zoning, and rental market regulations for the eroding housing affordability in Toronto and Vancouver.
One of the challenges, of course, is that the capital flowing into real estate is not all local – it’s also global. And many cities around the world are seeing high price-to-income multiples, perhaps because of that.
So exactly how much decoupling from local fundamentals should now be considered reasonable in our globalized world? And to what extent is this a result of “superstar economics?”
Here’s an excerpt from the UBS report:
The economics of Superstars explains why, in some professions, show business for instance, “small numbers of people earn enormous amounts of money and dominate the activities in which they engage.” By analogous reasoning, prices in the most attractive cities are expected to outperform average cities or rural areas in the long run. Hong Kong, London and San Francisco are exemplars of this theory.
The intuition is that the national and global growth of high-wealth households creates continued excess demand for the best locations. So, as long as supply cannot increase rapidly, prices in the so-called “Superstar cities” are supposed to decouple from rents, incomes and the respective countrywide price level.
I guess this is one of the reasons why bubbles are proven after the fact. If you would like to download a copy of the full UBS report, click here.
I’m on a flight right now reading the latest issue of Monocle Magazine in a seat that barely accommodates the length of my femur. This month’s issue has their annual ranking of the top 25 cities in the world.
Munich is first, which is not unusual for their ranking methodology. It generally scores well. Quality of life is high. Crime is low. The economy is strong. Beer gardens are fun. And you’re close to the Alps for snowboarding.
One stat that caught my attention — and it’s not included for all of the cities — is the number of homes built in the past year. Presumably this is all housing units in the metro area — for sale, for rent, subsidized and so on.
Here are their (clearly rounded) numbers. The order is as they appeared in the ranking, but again, not ever city included this stat.
Munich: 8,300
Tokyo: 150,000
Copenhagen: 5,000
Berlin: 11,000
Madrid: 1,600
Hamburg: 7,000
Melbourne: 5,100
Helsinki 4,400
Stockholm: 7,000 (18,000 in Greater Stockholm)
Sydney: 39,000
Hong Kong 17,000
Vancouver 22,600
Amsterdam 5,100
Kyoto 8,900
Dusseldorf 2,600
Barcelona 1,000
Some of these numbers appear to stand out, such as the counts for Tokyo, Sydney and maybe Vancouver. But it’s hard to draw any conclusions around housing supply and housing affordability.
Melbourne and Amsterdam allegedly have the same number of homes built over the past year, but according to Monocle the metro areas of Melbourne and Amsterdam have populations of 4.85 million and 2.4 million, respectively. This also says nothing about their growth rates.
So which one is doing a better job of addressing housing demand? I’m not sure.
But it was still interesting to see that Tokyo delivers somewhere around 150,000 homes a year. Tokyo is somewhat unique globally in that it’s a big city — one of the biggest — that somehow manages to gracefully balance both scale and quality of life.
Photo by Elias Keilhauer on Unsplash
The UBS index is a weighted average of the following five sub-indices:
Price-to-income
Price-to-rent (fundamental valuation)
Change in mortgage-to-GDP ratio
Change in construction-to-GDP ratio (economic distortion)
Relative price-city-to-country indicator
If you look at their price-to-income benchmark in isolation, Toronto drops down to the middle of the pack along with Geneva and San Francisco. Hong Kong, London and Paris sit at the top with the most unaffordable housing.
Still, UBS credits “an overly loose monetary policy”, foreign demand, tight zoning, and rental market regulations for the eroding housing affordability in Toronto and Vancouver.
One of the challenges, of course, is that the capital flowing into real estate is not all local – it’s also global. And many cities around the world are seeing high price-to-income multiples, perhaps because of that.
So exactly how much decoupling from local fundamentals should now be considered reasonable in our globalized world? And to what extent is this a result of “superstar economics?”
Here’s an excerpt from the UBS report:
The economics of Superstars explains why, in some professions, show business for instance, “small numbers of people earn enormous amounts of money and dominate the activities in which they engage.” By analogous reasoning, prices in the most attractive cities are expected to outperform average cities or rural areas in the long run. Hong Kong, London and San Francisco are exemplars of this theory.
The intuition is that the national and global growth of high-wealth households creates continued excess demand for the best locations. So, as long as supply cannot increase rapidly, prices in the so-called “Superstar cities” are supposed to decouple from rents, incomes and the respective countrywide price level.
I guess this is one of the reasons why bubbles are proven after the fact. If you would like to download a copy of the full UBS report, click here.
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