The sale of ultra-luxury residential units has surged 247 per cent year-on-year to 58 units so far in 2023, worth over Rs 4,000 crore, compared to 13 units sold in 2022 worth over Rs 1,100 crore, according to data compiled by property consultancy Anarock.
Mumbai dominated India’s ultra-luxury real estate market in terms of sales. (Photo credit: Pixabay)
Mumbai: Property sales in the ultra-luxury home segment have surged 247 per cent to Rs 4,063 crore, from Rs 1,170 crore in full year-2022, according to property consultancy firm Anarock. In unit terms, 58 ultras-luxury properties were sold so far in 2023 compared to 13 units in 2022.
Out of these, 53 units were sold in Mumbai, equalling 91 per cent of all ultra-luxury home sales. Of the remaining sales, 4 were made in Delhi NCR and 1 was made in Hyderabad. Two ultra-luxury homes were sold in Gurugram and 2 bungalows were sold in Delhi, according to the report.
Overall, 3,743 ultra-luxury apartment units were sold so far in 2023 compared to 730 units sold in 2022. Nearly 320 bungalows priced over Rs 40 crore were sold in 2023 so far, compared to 440 such bungalows sold in 2022, according to the report.
Rs 100 crore deals
Mumbai led the way in terms of Rs 100 crore deals by recording nearly 10 such transactions. In Delhi-NCR region, 2 property deals exceeding Rs 100 crore were recorded.
In 2022, of the 13 ultra-luxury homes sold across the country, 9 deals were in the Rs 100-150 crore range. All of these units were sold in Mumbai. Overall 11 deals were struck in Mumbai while Delhi-NCR saw 2 ultra-luxury property deals take place in 2022.
In terms of buyer profile, nearly 79 per cent of these properties were purchased by business owners in Mumbai in 2023. Nearly 16 per cent of buyers were C-suite professionals, according to the report.
The remaining 5 per cent of buyers were from a political or film background.
Which city witnessed highest growth in property sales in Q3 2023?
Bengaluru witnessed the highest rise in property unit sales in Q3 2023 at 60 per cent to 12590 units from 7,890 units in 2022, according to a report by digital real estate brokerage PropTiger.com.
Delhi-NCR witnessed a 44 per cent jump in sales to 7,800 units from 5,430 units a year ago. Kolkata recorded a 43 per cent jump to 3,610 units from 2,530 units a year ago. Hyderabad (24 per cent) and Ahmedabad (31 per cent) recorded 14,190 unit and 10,300 unit sales, respectively in Q3 2023.
One of the ‘hidden’ costs of selling your Mexican home might lay in the ‘exchange rate effect,’ because tax liabilities when you sell are calculated in Mexican pesos and don’t take into account any shifts in foreign currency exchange rates between the date you purchased and date you sell.
Prices may be agreed in US dollars, but official amounts are documented in Mexican pesos
In many towns and cities across Mexico, house prices are quoted in Mexican pesos when they are offered to the market for sale. However, in a few places —and most notably in Los Cabos, Puerto Vallarta, San Miguel de Allende, Ajijic/Chapala, and Cancun/Riviera Maya— home prices can often be seen quoted in US dollars.
Even though the sales transaction may be marketed (and agreed between the parties) in US dollars —or some other foreign currency— the amount to pay to close the transaction will be documented in Mexican pesos and the title deed will express that amount at the exchange rate prevalent on the date of the closing.
When you sell the property, any capital gains are calculated only in Mexican pesos and therefore shifts in the exchange rate can influence your tax liability as expressed in a foreign currency.
The ‘exchange rate effect’ when you sell
The best way to understand the ‘exchange rate effect’ is through an example.
Suppose you agreed to purchase a home in Mexico for a peso-equivalent value of US$500,000 dollars years ago, when there were $10 pesos to the dollar:
- your title deed shows a sale value of $5 million pesos;
- if you agree to sell the home today for the same US$500,000 dollars (with around 20 Mexican pesos to the US dollar), the peso value sales equivalent is close to $10 million—creating an effective $5 million pesos ‘capital gain’ on the property;
- so in this situation, even though you have realized zero gain in US dollar terms, you have realized a capital gain in Mexican peso terms, and you’re liable to pay capital gains tax on that peso gain when you sell.
If your home’s market value has doubled over that same time period, and you agree to sell for one million dollars:
- your sale price would be calculated and documented at about $20 million pesos creating a capital gain of around $15 million pesos ($20m less $5m pesos);
- in this situation, your gain in US dollar terms is US$500,000 (10 million pesos, at $20 pesos to US$1); however,
- your capital gain is calculated in pesos, on around $15 million pesos—equivalent to ~US$750,000 dollars;
- which means your capital gain is calculated on a sum that’s about 50% higher than your capital gain in US dollar terms.
Worthwhile tax allowances are available for residents
If you’re resident in Mexico and have a tax ID here, you may be able to avail yourself of some worthwhile tax exemptions and deductions that may reduce or eliminate any capital gain tax liabilities, but you cannot avoid the effect of the ‘capital gain’ expressed in pesos brought about through the exchange rate effect when the sales value was based in US dollars.
Keep this in mind when you are ready to sell if you purchased a home in Mexico negotiated using a US dollar value, because your tax liabilities are always calculated on the amounts documented on the title deeds in Mexican pesos, not any foreign currency equivalent.
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The Manhattan town house where the late musical theater composer and lyricist Stephen Sondheim lived for approximately 60 years has a lucky new owner. According to the Wall Street Journal, Sondheim’s estate was able to get the full $7 million asking price on the sale of his Turtle Bay Gardens home. As told by Compass listing agent Michael Franco who held the listing, the coveted dwelling garnered plenty of interest as it was well-priced and came with some serious Broadway cachet. Although the buyer has not yet been revealed, Franco told the WSJ that they are “a Sondheim fan” and that they plan to use the 5,700-square-foot town house as their primary residence.
Sondheim bought the five-story abode in 1960 and held on to the property until his death in 2021. The 19-foot-wide residence is part of a sought-after group of 20 historic homes from the 1800s, established as Turtle Bay Gardens in 1920. The homes surround a private garden. Writers E.B. White and Robert Gottlieb resided in one of the houses, while actor Katharine Hepburn was also once a neighbor of Sondheim’s.
Sondheim is said to have paid for the house with proceeds that came after writing the lyrics for hit productions West Side Story (1957) and Gypsy (1959). “I realized that with the royalties from the recent success of Gypsy, I could afford a down payment,” the composer said in the 2008 book Manhattan’s Turtle Bay: Story of a Midtown Neighborhood. “And then I rented out the top three floors of the town house to help me pay the mortgage.”
The icon’s former abode was built in 1899. One of the home’s highlights is the second floor’s solarium, which leads to a 30-foot terrace overlooking the garden courtyard. The sunlit room is lined with original stained glass windows. Near the solarium is Sondheim’s former music studio, which comes complete with built-in bookshelves and a wood-burning fireplace. Separating the spaces is a dramatic wood-paneled archway. The dining room on the first floor is adorned with classical motifs and has French doors that open to the communal gardens. The entire fourth floor is occupied by the primary suite and the fifth floor houses a studio that comes with a kitchenette and another terrace.
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Sondheim, who also composed the beloved musicals Sweeney Todd and Into the Woods, earned numerous accolades throughout his long career, including a Pulitzer Prize, an Oscar, seven Grammys, and nine Tonys.
Buro Happold is revolutionising the sports and entertainment sector by combining strategy and implementation. Giving clients a single point of contact and a truly holistic service aimed at increasing sustainability, reducing risk and enabling high performance venues and spaces.
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At heart, our team are problem solvers, exclusively focused on the sports and entertainment sector. We draw on specialists across the wider Buro Happold company in order to create teams that can tackle our clients’ most challenging problems.
Our approach
The sport and entertainment advisory team specialise in providing data-driven strategic, economic and design services in six key areas:
- Vision creation
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We add the most value to a project when we are engaged pre-concept and able to apply our Strategize-Design-Use approach as a holistic service, working the project from beginning to end.
Our work encompasses the entire sports and entertainment eco-system, from venues to major events and operators to government bodies.
We have a diverse client based, working with professional sports clubs, cities, government ministries, agencies, international federations, universities and event organising committees amongst others.
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What our clients say
“We have worked together over the past year, and it has been a positive experience with many perspectives being shared that have moved our projects on greatly. We look forward to many more opportunities to work together.”
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New York City finance officials are pursuing legislation to reauthorize the city’s ability to sell tax liens on property debt, a controversial program that lawmakers previously criticized for disproportionately targeting communities of color and hurting low-income homeowners.
The proposal includes “the most significant reforms to the tax lien sale since its inception,” Finance Commissioner Preston Niblack said at a Department of Finance event in October. It will “help ensure that no homeowner need ever face the prospect of eviction” and “preserve affordable housing opportunities in disadvantaged neighborhoods,” he said.
Council Member Justin Brannan (D), chair of the committee on finance, said in an interview this month that a bill will be introduced “soon” and that the goal is a “kinder, gentler, softer lien sale process.” But its exact timeline is yet unclear as lawmakers hammer out the final details.
City leaders will face an uphill battle to bring back a program that has faced backlash from the 51-member City Council, which allowed it to expire in February 2022. The move comes as city lawmakers scrounge for new revenue to fill a $7.1 billion budget gap in fiscal 2025, prompting Mayor Eric Adams (D) to demand a new round of budget cuts across agencies.
“The Council is committed to enacting solutions that protect the economic health of homeowners, who have too often been placed in jeopardy of losing their homes and equity built up over generations, as well as our communities,” a spokesperson for council Speaker Adrienne Adams (D) (no relation to the mayor) said in an email. “The Council is the legislative branch of government responsible for developing and passing legislation. While mayoral agencies can offer their ideas, we will make the decisions about legislation.”
‘Fundamentally Unfair’
Proponents of the tax lien sale program said it’s essential to ensure people pay their property taxes, the city’s largest revenue stream, and warn that property tax delinquencies have increased without it.
“Not only can we simply not afford this, but it is fundamentally unfair to responsible taxpayers who pay what they owe in good faith to let others get away with shirking this core civic responsibility,” Niblack said at the department event. He added the proposal “will give us the necessary authority to enforce against those who can pay but will take advantage of any opening to avoid meeting their obligations, while providing assistance and protections for those who would pay but face genuine difficulties in doing so.”
The department’s proposal will aim to reduce the number of homeowners facing enforcement through intensive outreach, provide vulnerable homeowners an easy exit from the lien sale by giving them more time to resolve issues, and partner with community land trusts and other nonprofits to preserve homes that can’t resolve their debt as affordable housing, a spokesperson said. Community land trusts buy the land properties sit on and issue ground leases, typically for 99 years, with affordability requirements.
The Finance Department in May discussed a framework for the bill with housing advocacy groups, but two groups said in recent interviews they remain opposed to bringing the sale back and are concerned the department’s vision won’t go far enough to protect tenants.
“The devil is all going to be in the detail,” said Paula Segal, senior staff attorney at Takeroot Justice, which provides legal support to community-based groups and is part of the Abolish the NYC Tax Lien Sale Coalition.
Delinquencies Grow
The city created the tax lien sale program in 1996 under then-Mayor Rudy Giuliani. It was meant as an alternative to the foreclosure process, after the city was saddled with thousands of mostly decrepit buildings that were abandoned in the fiscal crisis of the 1970s.
The program gave owners who hadn’t paid property taxes and water and sewer fees a 90-day notice to either pay the debt or enter payment plans with the city before the next scheduled lien sale. If they did neither, the lien—or legal claim placed on a property by the city—was sold at a discount to a trust that bundled the debt as bonds and sold them to investors. Collectors can charge fees and interest rates as high as 18% on the debt, according to a 2014 fiscal brief by the city Independent Budget Office. Any revenue generated beyond what’s needed to pay the debt service and bondholders flows back to the city.
Ana Champeny, vice president for research at the Citizens Budget Commission, said the 90-day notice usually triggers a “flood of revenue” before the lien sale even occurs, and that threat of enforcement pushes people to pay their tax bills. Revenue from the sale of tax liens itself—roughly $70 million annually—is small compared with the city’s $110.5 billion budget.
“The reality is, if other people are not paying, those who do pay, pay more,” she said.
Delinquent property taxes have increased almost every year since before the pandemic, to $708 million in fiscal 2023 from $338 million in fiscal 2018. The lien sale was wasn’t held for much of the pandemic under city and state directives, but one was held in fiscal 2022.
It’s difficult to determine how much the surge in debt owed to the city was caused by the end of the lien sale and how much is attributable to the Covid-19 pandemic, when homeowners and renters faced financial difficulties, Champeny said.
“It is typical for delinquency to bump up during an economic recession or other hits,” she said.
City Council Member Gale Brewer (D), who sits on the finance committee, said the proposal is worth considering because owners of large commercial buildings and deficient landlords shouldn’t get away with skipping out on property taxes.
Opposition Remains
Critics say the lien sale process makes people vulnerable to speculators looking to flip houses, and that gaps in outreach mean people don’t always know they owe money until their debt has ballooned from interest and fees.
“Sometimes that can snowball very quickly and people end up, you know, a year or two out with significantly more debt than they would have owed the city outright,” said Will Spisak, senior program associate at New Economy Project, which is part of the coalition that opposes the tax lien sale.
The program disproportionately affects communities of color. An analysis by the Coalition for Affordable Homes on liens for one-, two-, and three-family homes sold in 2016 found the city is six times more likely to sell a lien in a majority African-American neighborhood than in majority White neighborhoods, and twice as likely to sell a lien in a majority Hispanic neighborhood.
Segal, the Takeroot Justice attorney, said the city shouldn’t give up control of the debt to private interests and should use the opportunity to repurpose properties, including vacant land with tax delinquencies. Both she and Spisak said any proposal must also protect tenants who don’t own the property they’re living in.
“Vacant land, unoccupied buildings, those are opportunities for proactive planning for new affordable housing, for new open space, for new community centers, for any kind of amenities that neighborhoods need—particularly neighborhoods that have experienced redlining and disinvestment, which is where the lien sale is concentrated,” Segal said.
Today, dentsu announces a strategic senior global hire, with the appointment of Hamish Kinniburgh as Global Chief Strategy & Consultancy Officer, Media, dentsu. Based out of London, UK, Kinniburgh will join the global media executive leadership team, where he takes on the responsibility of elevating the strategic output of client teams worldwide through its network of global media agencies; Carat, iProspect and dentsu X.
With a 20+ year track record of driving business outcomes for the world’s biggest and newest brands across USA, EMEA and the UK, Kinniburgh has proven himself as strategic marketing leader. Prior to joining dentsu, Kinniburgh held the Global Chief Consultancy Officer position at Mediabrands and also the Global Chief Strategy Officer at UM in New York.
Kinniburgh will be part of the newly established Media practice within dentsu, reporting to Will Swayne in his new role as Global Practice President – Media. Swayne says of the appointment; “We’re at momentous moment for media right now as the landscape is changing at an astonishing pace and, this is impacting how clients perceive and partner with their agencies. I couldn’t be happier to welcome Hamish into the dentsu team. He has joined us at the perfect time, to bring his vast experience in both strategy and consultancy to our business, helping us unlock the untapped potential for clients and accelerate strong and sustainable growth.”
This new role in the organisation has been created to help bring together key specialisms within dentsu including Insight, Planning, Strategy and Media Effectiveness, as well as align thinking, capabilities and expertise from around the world. Kinniburgh comments on his new position; “dentsu offers something different to the industry and has a really exciting vision– not only in the way we approach a client’s objectives, but also because of our integration, specialist expertise and Japanese heritage. I’m looking forward to working with the team at such an exciting time of change and opportunity in our industry. Collaborating with the teams across dentsu to drive business successes as well as the societal gains we can achieve through our work.”
Kinniburgh has already begun embedding into the leadership, strategy and client teams within dentsu. For more information about dentsu and its global media agencies, capabilities and solutions please visit www.dentsu.com.
(iStockphoto)
By Phillip Molnar | San Diego Union-Tribune
Americans pay some of the highest real estate commissions in the world and the fees are coming under scrutiny.
The average commission on a home sale here is typically around 5 to 6 percent, usually split between the seller’s and buyer’s agents. That’s the third highest in the world, said a Wall Street Journal report. For example, commissions in the U.K. are typically 1.3 percent and 2.5 percent in Australia.
With rising mortgage rates, some consumer advocates have argued U.S. real estate agent commissions are too high considering the Internet has made it much easier for a shopper to research themselves. A federal jury in late October found the National Association of Realtors and several large brokerages conspired to keep commissions high and are liable for about $1.8 billion in damages.
Real estate agent groups say the commissions are justified given their expertise in navigating what is an increasingly complicated market. They also argue that commission fees are negotiable.
Here’s what some Southern California economists think.
Q: Are real estate agent commissions too high in the U.S.?
Caroline Freund, UC San Diego School of Global Policy and Strategy
YES: If we paid UK commissions, Americans would save more than $70 billion dollars a year! Realtors earn more from quick sales, high transaction prices, and maximum commission. They have incentives to share new listings with a few colleagues in advance, while steering buyers away from homes with discounted commissions. There is value to having an intermediary in a stressful negotiation, but the current system encourages collusion and bad behavior. This is the rare area where more regulation and oversight are warranted to improve competition.
Kelly Cunningham, San Diego Institute for Economic Research
NO: You largely pay for what you get negotiating real estate transaction prices and commissions. One pays for representation of real estate agents and the services they offer, including multiple listing access, or not and opt to negotiate deals oneself. Complications and risks for one of the largest transactions consumers ever make are significant and worth paying some amount for the expertise of professionals to handle such complexities. Comparing rates is misleading without considering all factors.
Lynn Reaser, economist
YES: The Internet has sharply reduced the cost of matching buyers and sellers compared to the common 5-6 percent commissions set up prior to the advent of computers. Rather than being the third highest in the world, 3-4 percent commissions might reflect the Realtor value in most transactions. Realtors still contribute valuable services in the search process for many buyers, arranging walk-throughs, negotiating prices, and handling the contract paperwork. It is just that those services may be too highly priced.
Phil Blair, Manpower
YES: So much change, good and bad has happened in the residential real estate market. Except the pricing for sales commissions. We know sellers of high-end properties negotiate the sales fees they will pay, commercial real estate does the same. Today, with so much technology available to buyers and sellers the services a buyer or seller needs are very different. And pricing needs to be a la cart,too.
Bob Rauch, R.A. Rauch & Associates
NO: No. If there was a law that said, “You must pay 6 percent commission when you sell your home” then I’d agree it is too high. However, commission offers are negotiable. They are determined by the market and the value that real estate agents bring to consumers. In my business, if a hotel charges $300 per night, that may sound high. So, stay somewhere else. If you don’t like the price a restaurant charges, eat somewhere else.
James Hamilton, UC San Diego
YES: Modern technology makes it much simpler to find details about homes available for sale and their fair market price. This allows brokers to connect buyers with sellers much more efficiently than used to be the case. There still is a benefit to having a personal broker to assist with some of the details. But that service is not worth 6 percent of the value of a $2 million home.
Norm Miller, University of San Diego
YES: The top 10 percent to 20 percent of full-time experienced agents are worth significant compensation for their advice and help in avoiding pitfalls and risks prior to a home transaction. The bottom 80 percent, many of whom are part-time and inexperienced, are not worth the typical fees and yet they add to the inefficiency of the market, i.e. overpriced listings. The top agents will do many more transactions if fees decline and hopefully, the marginal producers will drop out of the system.
Jamie Moraga, Franklin Revere
NO: Commissions are negotiable and there are plenty of agents to choose from. Real estate agents provide the requisite expertise and years of experience to earn that commission from scheduling property showings and marketing to negotiation and closing the deal. The commission fee is well worth the time, effort, and guidance a real estate agent provides and many consumers are willing to pay it. If you don’t want to pay a real estate agent commission, then there’s the option for a For Sale by Owner or listing in an app like Zillow.
David Ely, San Diego State University
YES: The finding against the NAR and several large brokerages by a federal jury provides the strongest evidence that commissions are excessive. Buyers’ lack of opportunity to negotiate the commission paid to their broker is consistent with this view. Agents can spend less time than in the past helping clients identify properties given the online resources available to buyers. An option to purchase services individually rather than as a package would lower expenses for many.
Ray Major, SANDAG
YES: Nothing a real estate agent does warrants 6 percent on the price of a house. The concept of “paying a percentage of your home’s value to sell it” is rooted in an 1800s system when agents had to work hard to find buyers. With the internet, agents are no longer needed. The average salary of a San Diegan working 2,000 hours is $69k, while the commission on a million-dollar home is $60k, this seems disproportionate.
Austin Neudecker, Weave Growth
YES: Compensation should be correlated with the value provided. I have had a very positive experience with an agent in town where the commission was earned, and another experience where I felt exploited. Digital platforms have made listing and advertising fairly commoditized. Depending on the market, one side of the transaction requires substantially less effort. Agent commissions should be paid by each side of the transaction to align interests, potentially scaled to performance and size.
Have an idea for an EconoMeter question? Email me at phillip.molnar@sduniontribune.com. Follow me on Threads: @phillip020
With house prices skyrocketing, the question of whether buying or renting is more convenient is hanging over our heads more and more. However, answering this question is not so simple. The truth is that there is no single solution, as it will depend on each household’s personal and economic situation.
Buying or renting a house – which is better in 2024?
The truth is that this question is somewhat more complex than it appears. While it is true that buying a property gives you ownership of a home that you can sell in the future to earn money, you need some initial savings to do so. Few, if any, banks today offer 100% mortgages, so if you don’t have around 20% saved up, buying becomes more complicated.
“It depends on your financial situation. If you have the money to take out a mortgage – approximately 20% of the property value – I always recommend my clients to buy,” says Agustín Escalera, director of Sunny Homes Marbella.
“Monthly mortgage repayments are almost always going to be less than rent. Furthermore, in areas such as the Costa del Sol, where long-term rentals have lost ground to holiday rentals, prices are sky high, which extends to the rest of Spain,” adds Agustín.
As for renting, it offers flexibility and requires less initial savings. If the property does not meet your expectations, you can move out. However, renting is not always the more affordable option in the long term, and although it is popularly said that “renting is a waste of money”, this is not necessarily true for everyone.
Your choice should be based on your financial situation, needs and lifestyle. Some people may feel that renting gives them freedom and flexibility, while others may see buying as an investment and a valuable asset for their future.
Things to consider when deciding whether to rent or buy
Spain is traditionally a country of homeowners. The percentage of people living in rented accommodation in Spain is below the European average, although this figure has increased in recent years, due to changes in the mortgage sector.
Several factors have to be considered when deciding whether it is better to rent or buy, including your economic and employment situation.
To buy a house, you usually have to take out a mortgage. If you can pay cash for a house, buying is naturally the best idea. If this is not the case, when applying for a mortgage loan, you need to have saved approximately 30% of the value of the house (20% not financed by the bank plus 10% for taxes and expenses), as mortgages are granted for a maximum of 80% of the total value.
- Future plans to consider before buying or renting
Another key point when deciding whether to rent or buy is your personal and professional situation. Are you planning to move? Does your job involve moving to another city? If the answer is yes, you should rent. Buying a home, on the other hand, is a long-term commitment. The mortgage will tie you to the house for as long as it lasts.
On the other hand, you have to consider your employment and financial situation when taking out a mortgage. If you cannot pay the debts contracted with the bank, the house could be repossessed. Even if the scenario is good when buying the house, you must think if worse times could come. That’s why you should fix a mortgage that is easy to pay in risky situations.
One advantage of buying a house is that you can sell it if your personal or financial situation changes. Ideally, you should wait until you have made money on the transaction, but if you find yourself in trouble, you can always recover part of your outlay.
To find out which is best for you, you should be aware of the state of the market. If the rent is sky-high and the banking conditions are favourable, you may be better off buying, and vice versa.
It should be noted that the rental sector lives by the ‘law of the quickest’. The supply is limited, and the best flats are snapped up very quickly. A reasonably priced, quality home lasts only a few days. On the other hand, the property market is more reflective.
For example, Carolina is one of those people who has found herself in this dilemma. “I have been looking to rent a house for months. I work from home and have pets, so I wanted something that would allow me to live comfortably with a garden. After months of searching, the most suitable property wasn’t less than €900. In the end, I decided to buy. I pay €480 in mortgage, almost half what it would cost me to rent,” she told idealista/news.
On the other hand, if you notice that house prices are falling, you may want to wait to see if they continue to do so and, in the meantime, live in rented accommodation. However, you run the risk of someone else snapping up your property.
Calculate whether renting or buying is the best for you
Now you know all this information the next step is to do the maths. Which is better for you, buying or renting?
When is it better to buy?
Buying rather than renting can be considered a long-term investment. If you’re wondering why buy, you should know that, unlike renting – where monthly payments do not accumulate into a tangible asset – mortgage repayments contribute to the equity of a property. Over time, this asset can increase in value, which could generate a return in the event of a future sale. Moreover, once the mortgage is fully paid off, you no longer have a significant monthly expense, providing future financial security, especially in retirement.
Another advantage of buying is the freedom and independence that comes with homeownership. Homeowners can personalise, renovate or make changes to their property as they see fit without asking permission from a landlord.
When is it more cost-effective to rent?
Renting may be a better option than buying a house if:
- You can’t get a mortgage: rent is cheaper than a down payment on a house.
- You move around a lot: If you travel a lot or work for long periods away from home, renting allows you to move around more easily.
- If you want to buy but don’t have the money or can’t find the house you like, renting is a good option.
Rent-to-own, the best of both worlds?
Rent-to-buy is one option to consider if you’re on the fence. On the one hand, you can live renting the house you like with a view to buying it in the future while you raise the money needed to do so.
Also, when the contract allows, you can back out, and move to another house. On the other hand, you can buy the house if you raise the money first, and the owner will be obliged to sell it. Not to mention that part of the monthly payments will be deducted from the final price.
Which is cheaper, rent or mortgage?
Generally, the mortgage will have lower repayments than renting, as the loan granted by the bank is usually paid over many years, which lowers your monthly payments. However, interest will have to be paid on the mortgage, which is not the case with renting.
In addition, rental prices depend on the properties’ characteristics (surface area, condition, location, etc.), and you can find houses for rent for much lower prices than mortgage payments, but they are not usually be very attractive (they will be in poor condition, in very isolated areas, etc.).
Buying or renting a house as a young person in 2024
If you are young and have the financial resources to move out of your parents’, you should have questions in mind to help decide whether to buy or rent. Moreover, you should know that grants are available to buy a home. Here are some of the pros and cons of both options:
Buying a house when you are young
Some advantages of buying a house when young are:
- Long-term investment: Over time, the property value can increase, offering a return on investment.
- Stability: Once purchased, there is no risk of contract terms or unexpected rent increases.
- Independence: Greater freedom to alter and personalise the property.
On the other hand, buying a house when you are young also has certain disadvantages:
- Large initial investment: You need to have some savings and pay the interest on the mortgage.
- Responsibility: As the owner, you are responsible for all maintenance and repairs.
- Less flexibility: Selling and moving is often more complicated and costly than simply terminating a rental contract.
Renting a property as a young person
Some of the advantages of renting a house when you are young:
- Flexibility: It is easier to move if personal or work circumstances change or you want to explore a new place.
- Fewer initial responsibilities: There is no large initial outlay, and maintenance is generally the landlord’s responsibility.
- Try before you buy: Renting allows you to experience different areas and housing types before making a long-term commitment.
Renting a flat when you are young can have some disadvantages:
- Expense: In the long run, you could spend more on rent than on a mortgage.
- Limitations: Landlords may have restrictions, such as no pets or limits on personalising the space.
- Instability: Rental contracts are often short-term and may not be renewed.
How Does Inflation Impact Home Prices?
Inflation impacts almost everything in the economy, causing prices to rise over time. Housing is just one of the things it impacts, and given the recent high inflation, it’s reasonable to wonder what will happen to home prices, especially if you’re in the market to purchase a home.
Key Takeaways
- Generally, rent has kept pace with inflation as measured by the Consumer Price Index, while home prices have risen faster than inflation.
- Housing is a highly regional market, so some areas see price changes much more rapidly or to a greater extent.
- Home prices also tend to rise faster than incomes, meaning homes have become less affordable.
- Prices have fallen slightly in recent months as rates have risen.
Inflation and the Consumer Price Index
When you hear people talk about inflation, they usually discuss it by saying that prices rose by a specific percentage. This is a relatively easy-to-understand way of discussing price increases, but it misses some key nuances.
In the United States, the Consumer Price Index (CPI) is a key measure of inflation. It tracks the change in price paid by consumers for a basket of consumer goods. However, not every product in that basket of goods will see the same change in price.
For example, in the 12 months ending in May 2023, the CPI rose by an average of 4%. However, some things rose in price and others fell. Food prices rose by 6.7%, and electricity rose by 5.9%, but gas fell by 20.4%.
Not everything moves in lockstep with the average rate of inflation. Changes in housing prices tend to be influenced by inflation, but they don’t perfectly follow overall inflation trends.
Factors That Have Led to Increases in House Prices
A variety of factors influence housing prices. No single factor is the sole cause of rising costs.
Supply and demand is one of the key factors. There is a finite amount of space to build housing, yet the population of the United States has grown significantly over the past century.
Other influences include a low supply of affordable housing and zoning regulations that make constructing new housing, especially high-density housing difficult.
The pandemic has also played a role, boosting the prices of commodities, including those used in home construction. For example, lumber rose in price by 114% between May 2020 and May 2021. Rising demand for space to work at home and growing interest in moving from cities to suburbs also created higher churn levels, which can boost housing prices.
Inflation vs. Housing Prices Over Time
Increases in housing prices have historically outpaced inflation, meaning that homes have become more expensive over time, even when adjusting for the impact of inflation.
Since 1963, the first year for which the Federal Reserve Bank of St. Louis has data on housing prices, the Consumer Price Index has risen from 30.44 to 303.294, an increase of 896%. During that same time, the median sales price of a home rose from $17,800 to $436,800, an increase of 2,353.93%.
CPI and Housing Prices
Since 1963, inflation has risen 896%, while housing prices have risen by more than 2,350%. During that same time, rent rose by 892%. That means rent has held pace with inflation, while homes have seen significant price increases, even when adjusted for inflation. However, given the regional and local characteristics of the rental market, some areas may have seen rents rise at rates faster than inflation.
However, home prices are just one piece of the puzzle when determining the price of housing. Roughly a third of people in the United States or about 36%) rent, rather than own, their homes.
Since 1963, the CPI for rent rose from 40 to 396.726, an increase of 891.82%, roughly the same as inflation.
In short, the price of homes has increased at a rate greater than inflation, while rents have largely kept pace with inflation. However, it’s worth noting that rents are highly regional, so some areas have seen affordability change more than others.
In the past few years, there have been significant upheavals in both inflation and housing prices, thanks in part to the impact of the pandemic.
Housing saw a major price spike, with the Case-Shiller National Home Price Index jumping by 18.6% between September 2020 and September 2021, the strongest year of growth on record. This index tracks changes in the purchase price of single-family homes in the U.S., updated on a monthly basis. It does not include multi-family homes or newly constructed homes.
Rental prices fell slightly but recovered quickly and rose above pre-pandemic trends. Rents continued to spike through 2022, at one point seeing more than 17% year-over-year increases, though they have calmed in recent months.
Housing Prices vs. Income
Inflation causes the price of goods to rise over time, but if incomes keep pace with inflation, consumers’ purchasing power is largely unaffected. So long as incomes rise with inflation, the impact of increases in housing prices feels less painful to consumers.
In 1963, the median family income in the United States was $6,249 annually. In 2021, that number reached $88,590, a rise of 1,317.67%, well below the increase in the price of a home but outpacing the rise in rents.
That means that over the past 60 years, buying a home has generally become less affordable because incomes have not kept up with the price of homes available for sale. However, renting has gotten slightly more affordable because incomes have risen by more than the typical rent.
Remember that this is on a national, not regional, scale and reflects long-term change over 60 years. In recent years, rent increases have been vastly higher than income increases. And some areas might have seen very different changes in income and home prices.
For example, between 1984 and 2021, home prices in Massachusetts rose by 469.89% while incomes increased by 221.10%.
Nationally, incomes rose by 235.15% and housing prices by 372.89%, meaning that residents of Massachusetts saw housing get significantly more expensive relative to income compared to residents of some other states.
Inflation and Interest Rates
A common response to high inflation is for the Federal Reserve to raise interest rates. Increasing rates encourages saving and discourages borrowing, which can help slow down the economy and reduce the rate of inflation.
Since the Fed began raising rates in early 2022, the Federal Funds Rate has increased from roughly 0% to about 5%. Rates for other loan products, including mortgages, have also risen.
In addition to the actual price of homes, interest rates play a huge role in determining the affordability of housing. The majority of homeowners, about 63%, have a mortgage on their home. As interest rates rise, the required monthly payment on mortgages also increases, making homes harder to afford.
In January 2020, the average interest rate on a 30-year, fixed-rate loan was 3.72%. In July 2023, it was 6.81%.
If someone purchased a home for the median price in January 2020, they would have paid $329,000. If they financed the full amount at the average rate at the time, their monthly principal and interest payment would amount to $1,518.
Financing a home at July 2023’s median price of $436,800 at 6.81% would result in a payment of $2,851. Despite the price of a home increasing by about one-third, the monthly payment nearly doubled due to higher rates.
This means that high inflation, and the policy changes that aim to fight it, have a compounding effect on housing affordability. Home prices tend to rise faster than inflation and high interest rates greatly increase monthly housing costs.
The Future of the Housing Market
If you’re in the market to buy a home, there are both reasons for hope and reasons to worry.
On the one hand, housing prices spiked during the Covid-19 pandemic, but have decreased very slightly. Between Q4 2022 and Q1 2023, the median home price dropped from $479,500 to $436,800. If prices continue to cool, that could be good news for homebuyers.
However, interest rates are high, meaning homes would need to see significant price reductions for monthly mortgage costs to return to the levels they were at just a few years ago. Rates are likely to remain high for some time, or even increase further given Federal Reserve chair Jerome Powell’s statement that another rate hike is likely by the end of the year.
Home-Buying Tips
If you’re in the market to buy a home, it can feel overwhelming, especially given the high home prices and interest rates in recent years.
There is some hope given the decrease in median home prices between Q4 2022 and Q1 2023, but it’s unclear if that trend will continue. Also, keep in mind that housing is a very regional market. Some in-demand areas might see prices rise even while the national average falls.
Massachusetts is one such area. The all-transactions house price index rose by 0.9% between Q4 2022 and Q1 2023 compared to the large fall in the national median home price.
Given the odds of future increases in interest rates and the uncertainty of future price movements, it may be a good idea to try to buy sooner rather than later. If rates fall in the future, refinancing your mortgage to a lower rate is an option.
You’re not locked into a high rate. This makes buying with a high interest rate, assuming the payment is still affordable, less financially painful than waiting and seeing home prices rise.
To make it easier to afford a home, look into local homebuyer programs. Many areas have special opportunities, especially for low-income or first-time homebuyers. For example, Los Angeles offers low-cost loans to help low-income, first-time buyers afford the down payment on a home.
Many banks also have discounts available for first-time buyers. Check with your local government and lenders to see what programs are available.
You should also be aware of the different mortgage programs out there. Conventional loans are just one type of loan that you can use to buy a home. If you can qualify for a VA loan through military service or a USDA loan by buying a home in a qualifying rural area, you can benefit from low down payment requirements and easier underwriting.
Most people with fair or good credit and reasonable amounts of debt can also qualify for FHA loans, that only ask for a 3.5% down payment, which may make homeownership more achievable.
Who Benefits from Inflation in the Housing Market?
Generally, homeowners, especially those with mortgages, benefit from inflation. The value of homes tends to increase faster than inflation, so their investment does not lose value. At the same time, their mortgage balance does not change, so the amount they have to repay to pay off the loan is worth less relative to when they got the loan.
Is Inflation Good For Real Estate?
Real estate is often seen as a good hedge against inflation given that it increases in price at a rate faster than inflation. That means that inflation can be a good thing for people who own property.
How Does Inflation Impact Mortgage Rates?
Typically, the Federal Reserve attempts to reduce inflation by raising interest rates. That means that rising inflation usually leads to mortgage rates increasing. Higher mortgage rates, in turn, increase the monthly housing cost for people who borrow money to buy homes.
What Happens to House Prices During Recessions?
Generally, during recessions, housing prices fall or hold steady. This reflects reduced demand because fewer people can afford to move to a new home.
Who Benefits From Inflation?
Inflation tends to benefit people who have debt because they can repay those debts using money that has lower purchasing power than the money they initially borrowed. That means inflation can help current homeowners with a mortgage. Savers see a negative effect from inflation as their savings loses purchasing power.
What Are The Worst Investments During Inflation?
Cash and long-term fixed-rate investments like bonds tend to be some of the worst-performing assets during inflation. This is because the interest that you earn may not be sufficient to keep up with inflation, leading to a potential loss of purchasing power.
Bottom Line
Historically, housing prices have outpaced inflation, meaning that homes have become more expensive on a real basis. If you’re in the market to buy a home, that may mean you have a good reason to try to buy sooner rather than later. The longer you wait, the more home prices could rise, putting a home purchase out of reach.
On the other hand, renters have historically seen prices increase at a similar rate to inflation. Though rent can be volatile, over the long run, it has remained largely affordable, so renters do not have to worry about long-term inflation as much as those who want to buy a home.
You might have heard about AI in sci-fi movies or tech conferences, but do you know that it’s a game-changer for real estate agents too? That’s right!
Artificial Intelligence (AI) is your secret sauce to becoming the ultimate authority in the real estate world. In this article, we’re going to dive into the incredible ways AI can skyrocket your authority and set you apart from the competition. Buckle up; it’s going to be a fun ride.
1. Personalized customer engagement: Making every client feel like a VIP
Imagine having a magical marketing genie by your side. AI can make that happen.
With AI, you can create super personalized marketing campaigns that resonate with your clients on a whole new level. AI can analyze mountains of data to understand your clients’ preferences and behaviors. This means you can tailor your messages and recommendations to each client, making them feel like the VIPs they are.
2. Predictive analytics for smart decision-making: Be the real estate oracle
Ever wished you could predict the future of the real estate market? Well, AI can’t give you a crystal ball, but it’s the next best thing.
AI algorithms can crunch market data like a champ and tell you where the housing market trends are heading. You’ll be the real estate forecaster, making strategic decisions that leave your competition in the dust.
3. Content creation made easy: Never struggle for words again
We all know content is king, but churning out blog posts and property descriptions can be a royal pain. That’s where AI swoops in to save the day.
AI tools can generate high-quality content, from captivating property descriptions to informative blog posts. This not only saves you time but also keeps your brand image consistent. Who said writing had to be a headache?
4. Virtual tours and 3D renderings: Bringing properties to life
Want to give your clients a mind-blowing experience without leaving their couch? AI can make it happen. With AI, you can create immersive virtual tours and stunning 3D renderings that bring properties to life on screens. Your clients will feel like they’re actually walking through their dream home. It’s like having a magic carpet that showcases properties 24/7.
5. Enhanced lead generation: Work smarter, not harder
Leads are the lifeblood of your business, right? AI can supercharge your lead-generation efforts. It can identify potential leads more efficiently, taking some of the load off your shoulders. Plus, AI ensures that the leads you get are more likely to convert into clients. It’s like having a lead magnet that never stops attracting.
6. Chatbots for 24/7 support: Always there when you can’t be
Have you ever wished you could provide round-the-clock customer support? Well, AI-powered chatbots are here to make your wish come true.
These tireless digital assistants can answer common questions, guide clients through your website, and even nurture leads while you’re catching some much-needed beauty sleep. Your clients won’t even notice the difference!
Embrace the future, be the ultimate authority
So, there you have it – the AI-powered secrets to becoming the ultimate authority in real estate. Embrace the future, and watch your success skyrocket. AI isn’t here to replace you; it’s here to make your life easier and your brand stronger.
In the fast-paced world of real estate marketing, AI is your ticket to standing out, providing unparalleled client experiences, and staying ahead of the competition. It’s time to be the real estate authority you were born to be. So, what are you waiting for? Dive into the world of AI and let it propel your real estate career to new heights!
The future is here, and it’s AI-powered. Are you ready for the ride?
Krista Mashore is the owner and founder of Krista Mashore Coaching.