Hawaii is the 'perfect place to retire by the beach,' says millionaire—but there are 3 big downsides
In 2012, at 34 years old, I left my investment banking job and retired early with a net worth of $3 million. Currently, I live in San Francisco with my wife and two young kids.
But since 1977, I’ve regularly traveled back and forth to Hawaii, where my parents have been retired for 15 years. They have a simple life with a modest budget, living off retirement savings and a government pension — thanks to the three decades they spent working in the U.S. Foreign Service.
Seeing my parents live their dream, we want to follow suit. Our plan is to move to Hawaii by 2025. Between my parents’ experience and my own, I’ve learned a lot about the ins and outs of retiring in Hawaii.
Our consensus it’s the perfect place to retire by the beach — although there are still a few downsides to keep in mind.
How much money do you need to retire in Hawaii?
Hawaii was ranked ranked in the top five states where Americans want to retire most. But it also has the highest cost of living in the U.S.
Many financial experts suggest maintaining a 4% withdrawal rate to ensure that your investments last throughout retirement.
The median household income in Honolulu County, for example, is $88,000. If someone wanted to withdraw that $88,000 from their assets each year, they’d need about $2,200,000 in investments to withdraw at a rate of 4%.
But that’s just one example. How much money you need depends on where you’d like to live, your standard of living and your expected income.
If you can comfortably live off $42,500 a year, have a pension or can file for Social Security, you can have a lower net worth and less income-generating investments at the beginning of your retirement journey.
The downsides of retiring in Hawaii
Before you start your beach retirement plan, beware of these three biggest downsides first:
1. High cost of housing
As of June 2022, the median single-family home price in Honolulu is $1,050,000. Meanwhile, the median price for a condo on Oahu, which is considered a great place to retire on a budget, is currently $535,000 — up 16% from June 2021.
If you want to retire in Hawaii, consider buying a small condo or rent, rather than purchasing a single-family home. The average rent for a 594 square foot apartment is roughly $2,042, according to RentCafe.
2. Expensive groceries and gas
According to a 2021 report by the Missouri Economic Research and Information Center, Hawaii’s grocery prices are the highest in the nation.
For example, I’ve paid $8.99 for a gallon of whole milk on Oahu, whereas in San Francisco, it’s about $6. And while Hawaiian-grown mangos are delicious, they can cost about $6 each!
Further, if you like to drive, Hawaii has unusually high gas prices. The average price per gallon in the state today is $5.41 and is continuing to rise, according to AAA, while the national average is $4.03.
3. You may feel claustrophobic
It only takes about four hours to drive around the 597 square miles of Oahu. Although the island does hold about one million people, in my experience, it can still feel small.
And with the pandemic continuing to make air and ship travel unappealing, it is possible that could feel a bit stuck at times, without those options at your disposal.
The benefits of retiring in Hawaii
Yes, it’s expensive. But if you’re curious what it could be like to retire in Hawaii, here are some surprising perks:
1. Less stress and top health care
Hawaii was ranked second in terms of happiness and well-being in a 2021 study from health care company Sharecare.
My parents worked in Washington D.C., Paris, Guangzhou, Kobe, Taipei and other big cities before retiring in Honolulu. They’ve found their Hawaiian lifestyle to be incredibly relaxing compared to all the other cities they’ve lived in.
2. Top-rated healthcare
The United Health Foundation also ranks Hawaii as the third healthiest state in the country. And according to U.S. News’ list of Best States for Health Care, Hawaii takes the top spot.
I’m not surprised. Hawaii has beautiful weather nearly year-round, public beaches and parks, a variety of locally grown and raised food, and great access to preventive medical and dental treatment.
If you’re looking for a more healthy and active lifestyle, you can certainly find it in Hawaii.
3. ‘Ohana’ means family
An important part of Hawaiian culture is the care and nurturing of family and friends, or “ohana.” I’ve observed that nearly everywhere you go, whether it’s to a restaurant or to the mall, things are set up to be a family-friendly experience.
Plus, it’s not uncommon to have multiple generations under one roof in Hawaii. While my wife, children and I probably won’t live in my parents house, we hope to rent or buy nearby.
4. Tremendous diversity
Hawaii topped the list of states that have the most diverse population in the country, coming ahead of California and Nevada, according to data from the U.S. Census Bureau.
5. Decent tax advantages
Hawaii ranks as having one of the lowest property tax rates in the country, at an average of only 0.28%. If you have a Federal pension, it’s exempt from state income tax. And the sales tax rate is a reasonable 4% to 4.5%, versus 7.25% to 8.25% in California.
However, Hawaii also has one of the highest state income tax rates, topping out at 11% if you make over $200,000. If you make between $48,001 and $150,000, you pay a state income tax rate of 8.25%.
Why I want to retire in Honolulu
For my family, moving to Honolulu will actually save us money. The median San Francisco home price is about $1,633,650, much higher than in Honolulu.
If we move, we’d sell our home here and pay cash for a property in Honolulu that’s around 40% cheaper. We’d then reinvest the house savings into real estate crowdfunding, dividend stocks and REITs to boost our passive income for retirement.
Instead of needing $300,000 a year in passive investment income to fund the the lifestyle we desire, $150,000 to $200,000 is probably plenty in Honolulu.
But more than that, with my parents in their 70s, I’d like to spend as much time with them as possible. Hawaii just feels like home.
Sam Dogen worked in investing banking for 13 years before starting Financial Samurai, his personal finance website. His new book “Buy This, Not That: How to Spend Your Way to Wealth and Financial Freedom” is out now. Follow him on Twitter @financialsamura.
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CHUBYNSKE, Ukraine — Natalia Popova has found a new purpose in life: Rescuing wild animals and pets from the devastation wrought by the war in Ukraine.
“They are my life,” says the 50-year-old, stroking a light-furred lioness like a kitten. From inside an enclosure, the animal rejoices at the attention, lying on her back and stretching her paws up toward her caretaker.
Popova, in cooperation with the animal protection group UA Animals, has already saved more than 300 animals from the war; 200 of them went abroad and 100 found new homes in western Ukraine, which is considered safer. Many of them were wild animals who were kept as pets at private homes before their owners fled Russian shelling and missiles.
Popova’s shelter in the Kyiv region village of Chubynske now houses 133 animals. It’s a broad menagerie, including 13 lions, a leopard, a tiger, three deer, wolves, foxes, raccoons and roe deer, as well as domesticated animals like horses, donkeys, goats, rabbits, dogs, cats and birds.
The animals awaiting evacuation to Poland were rescued from hot spots such as eastern Ukraine’s Kharkiv and Donetsk regions, which see daily bombardments and active fighting. The Ukrainian soldiers who let Popova know when animals near the front lines need help joke that she has many lives, like a cat.
“No one wants to go there. Everyone is afraid. I am also scared, but I go anyway,” she said.
Often she is trembling in the car on her way to rescue another wild animal.
“I feel very sorry for them. I can imagine the stress animals are under because of the war, and no one can help them,” Popova said.
In most cases, she knows nothing about the animals she rescues, neither their names and ages nor their owners.
“Animals don’t introduce themselves when they come to us,” she joked.
For the first months of the war, Popova drove to war hot spots alone, but a couple from UA Animals recently offered to transport and help her.
“Our record is an evacuation in 16 minutes, when we saved a lion between Kramatorsk and Sloviansk,” Popova said. An economist by education with no formal veterinary experience, she administered anesthesia on the lion because the animal had to be put to sleep before it could be transported.
Popova says she has always been very attached to animals. In kindergarten, she built houses for worms and talked to birds. In 1999, she opened the first private horse club in Ukraine. But it wasn’t until four years ago that she saved her first lion.
An organization against slaughterhouses approached her with a request for help saving a lion with a broken spine. She did not know how she could help because her expertise was in horses. But when she saw a photo of the big cat, Popova could not resist.
She built an enclosure and took in the lion the next morning, paying the owner. Later, Popova created a social media page titled “Help the Lioness,” and people began to write asking for help saving other wild animals.
Yana, the first lioness she rescued, has become a family member since she could not find a new home due to a disability. Popova took care of her until she died two weeks ago.
The shelter is just a temporary stop for the animals. Popova rehabilitates them and then looks for new homes for them. She feels a special connection with each big cat, but says she does not mind letting them go.
“I love them, and I understand that I do not have the resources to provide them with the comfortable life they deserve,” says Popova.
At first, she bankrolled the shelter with her own funds from the horse business. But since Russia invaded Ukraine on Feb. 24, the horse business has not been profitable. With more than $14,000 a month needed to keep animals healthy and fed, she has turned to borrowing, and seen her debt grow to $200,000.
She gets some money from UA Animals and from donations, but worries about how to keep everything together have kept her up at night.
“But I will still borrow money, go to hot spots and save animals. I can’t say no to them,” she said.
Popova sends all her animals to the Poznań Zoo in Poland, which helps her evacuate them and find them new homes. Some animals have already been transported to Spain, France and South Africa. Her next project is sending 12 lions to Poland this week.
With no end to the fighting in sight, Popova knows she will still be needed.
“My mission in this war is to save wild animals,” she says.
———
Follow all AP stories on the war in Ukraine at https://apnews.com/hub/russia-ukraine.
The dizzying, bionic two years of a record-setting sales pace in Ottawa’s real estate market has certainly slowed and realtors describe a return to normal levels.
That return to normalcy though has stirred up fears and many misconceptions, says Taylor Bennett of Bennett Property Shop Realty.
Bennett is the co-host of The Bennett Real Estate and Wealth Show on Newstalk 580 CFRA and regular contributor to CTV Ottawa’s News at Noon.
“I spend a great deal of my time acting as a therapist for people who are worried about the market,” says Bennett
He says he hears many myths and misconceptions, many times a day, every day from nervous clients. He wants to correct them to help quell clients’ anxiety.
Taylor Bennett on Five Current Myths
Myth: “Sales are down, the market is crashing”
“While sales are down compared to last year, it’s important to put the last year into context – 2021 was the best year for real estate, setting both sales and price records,” Bennett says.
“So, a comparison to the best year on record is like comparing an NHLers season stats to Wayne Gretzky’s best year – it’s not going to look very successful. But when you pull back and take a broader look, we are currently on the same pace as we were in 2019 – the third best year on record.”
Myth: “There are no more multiple offers, I can low-ball sellers”
“While it’s true that there are fewer multiple offers than before, there are still some occurring on well-priced and unique homes. But even in transactions where it’s one seller vs one buyer, on average, homes are selling for $10,000 more than their list price so buyers should be prepared to pay the asking price,” Bennett said. “However, buyers do get an advantage as they now have the opportunity to perhaps work in a condition or two for added protection.”
Myth: “Homes are taking longer to sell, sellers are panicking”
“Homes are, in fact, taking 55 per cent more time to sell; but to add some context, the average days-on-market has increased by only one week from 13 days to 20. Again, we have become accustomed to seeing homes sell in less than a week, but that was extremely unusual for Ottawa,” Bennett says.
“In June 2019, on average it took over 35 days for a home to sell, and that was considered exceptionally quick at that time. Plus keep in mind, that there is a difference between the selling date and the closing date – many sellers are looking for closing dates in the 90-day range, so if a sale takes a few weeks longer they still have ample time for their desired closing date.”
Myth: “I missed the best opportunity to sell. There are no more record-setting prices”
“Since the end of 2019, prices in the Ottawa market have increased by over 64 per cent (From $441,693 to $727,556)! That type of growth would normally take almost 10 years to achieve, but it took only 30 months,” Bennett said.
“So, if you are still thinking of selling, while you may not set a record price for your neighbourhood, if you bought your home before 2019, your home has likely increased well beyond the value it would be if Ottawa had its typical increases.
“But it’s important to keep in mind that setting a record price doesn’t necessarily mean you made the most profit – even though you may sell for less than your neighbour, if you paid less and/or put less money into your home (renovations, updates, etc.) than it’s likely your return-on-investment would be far greater than your neighbour.”
Myth: “With mortgage rates on the rise, people will default on their mortgages”
“The rising interest rates have undoubtedly had an impact on the market. In fact, that was one of the major reasons why the mortgage interest rates were increased, to help stabilize the markets. But mortgage rates are roughly at the same level that they were in 2019 – again, the third best year on record. The most recent increase was announced last week at 100 basis points, or one per cent. While one per cent may seem like an insignificant number, that rise decreased buying power by 10 per cent! But these increases weren’t announced overnight, many homeowners and buyers were able to lock in at the lower rates before they increased,” Bennett said.
“More importantly, when approving a mortgage loan, banks use a qualifying rate – which is approximately two per cent higher than your actual mortgage rate. Being risk-averse, banks build in this ‘buffer room’ to protect against an increase in the mortgage rates – which is precisely what is happening now. Which means, this recent rate increase shouldn’t impact current homeowners or any buyers who are working with a full-service brokerage and have locked in a guaranteed rate with a mortgage pre-approval. However, if you are a potential buyer shopping on your own and you simply used an online mortgage calculator to get pre-approved, it’s unlikely you have a guaranteed rate and this recent increase will have an impact on your purchase.”
Dear MarketWatch,
My wife and I are 64 and 65 years old, respectively. I plan on retiring in two years when I’ll be fully vested with my current employer, avoiding early stock withdrawal penalties, and be closer to tapping into Social Security benefits. Currently we have $1.5 million in 401(k) investments, in moderate to aggressive funds, and a few small IRAs. We also have about $600,000 in various dividend earning stocks, including the mentioned company stock, as well as annuities. We have no debts of any kind and are currently living in a two-family property that we own, mortgage free. Our net income from the rented unit is approximately $1,500/month.
Our “perfect world” goals for retirement is to be closer to family and own a modest home in California, with an ADU (Affordable Dwelling Unit) or home with some small additional rental income, and spend months at a time traveling abroad. We are not “luxury” travelers, enjoy modest traveling and prefer the B&B stays.
We were very fortunate to be able to tap into the frenetic real-estate market last year and sell our main residence and have $1.1 million to invest in our next home. We’re now on the other side of that market and will most likely be forced to buy a property at an inflated price. Our concern is not getting much for our money, but moreover putting all our cash into an expensive home may not make sense, given the traveling we want to do.
We plan to keep and rent both units of our current two-family. Should we invest that large amount of cash and rent a small apartment near our family, or bite the bullet and move forward with purchasing an expensive home?
Many thanks!
Dear reader,
Homes are definitely pricey these days, but the tide in the real-estate market is turning back to the buyer, so you may be in better shape than you think. Of course, there are still plenty of variables to consider, as you know.
It’s now a “buyer’s market” in real estate, said William Parrott, a certified financial planner and chief executive officer at Parrott Wealth Management.
Home prices are beginning to fall in various markets across the country because of rising mortgage interest rates, at least for now. But as we’ve seen in just the last few years, things can change quickly. “If inflation has peaked and interest rates start dropping, the real-estate market could heat up again,” Parrott said.
You are at quite the advantage right now. You’re still working, so you’re bringing in income during this wild economic environment with rising inflation and interest rates and market volatility the past year. Plus, you have rental income. There is a healthy nest egg stashed away for retirement, which doesn’t include the money made from the recent sale of your main residence. And you seem very focused on getting the numbers right.
Want more actionable tips for your retirement savings journey? Read MarketWatch’s ‘Retirement Hacks’ column
If you’re really not sure if renting or buying is the best decision for you and your spouse right now, don’t jump into anything. Buying a home just to turn around and sell it shortly after can be an expensive blunder, and it’s not like there’s a rental lease expiring in the next month or two. If you haven’t already, start looking at properties for purchase and rent where you intend to move in California, and try to track the progress. How much have homes sold for in the last couple of years? What’s the rate of inflation in the rental market there, and what do analysts expect it to be in the coming year or two?
If you were to buy a home with a higher interest rate, and if you were to take on any mortgage, you could always refinance later on if it makes financial sense. “They can always go adjustable for a couple years and refinance later,” said Linda Farinola, a certified financial planner and president of Princeton Financial Group. “If it is the right property for them, they will stay there for a while and the price will work itself out over time.” Just watch with adjustable rates — they can be risky since there are a lot of uncertainties, such as if the rate will spike before you’re ready (or even can) refinance.
Refinancing can save homeowners thousands of dollars, but it doesn’t make sense for everyone, as there are fees and other factors to consider (duration of mortgage, if you’ll be selling the house before paying it off, and so on). If you can reduce your interest rate by three-quarters of a percentage point, or shorten your loan term, refinancing may be worth it, Nerdwallet’s Holden Lewis told MarketWatch Picks.
If you decide renting is the best choice, it’s not like you’re locked in forever. You might even want to rent temporarily, just to make sure that location is the right place for you to be (taking into account the cost of living, temperature, proximity to entertainment and important medical facilities, etc.) and then end up buying something when it pops up on the market. In your current situation, “flexibility (renting) trumps owning,” said Thomas Scanlon, a certified financial planner at Raymond James Financial Services.
If you can, add the extra challenge of picking a smaller place to rent and get rid of stuff you don’t actually need or use, Scanlon added. He also mentioned getting a good renter insurance policy if you were to go this route.
Above all, think about what either choice would mean for you and your family. You can pore over the numbers a million times, but if the choice ultimately isn’t right for your family, you may not be happy – even if you’re saving a ton of money.
Readers: Do you have suggestions for this reader? Add them in the comments below.
Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com
This is a beautifully refurbished and tastefully extended stone home with beautiful gardens and situated in a picturesque village location.
The current owners carried out an extensive, high-specification programme of building works which was completed in March 2020 and brought the original period property into the 21st Century.
Home Cottage today offers a well-proportioned, contemporary accommodation with a character of its own.
It features south-facing double-glazed windows, a multi- zone heating system, UK oak doors set in solid oak frames with matching skirting boards and architraves, a bespoke Nurlex kitchen with a full range of appliances and stylishly refitted WC, bathroom and shower rooms.
Making the most of the south-facing gardens, the interior has fitted blinds throughout:
Entering from the back double glazed door, you are greeted with a reception hall with sloping ceiling. Leading off, there is a cloakroom/WC refitted with a contemporary white suite, a utility room with plumbing for a washing machine and cabinets and a beautiful triple-aspect lounge room with an electric log-effect stove and windows overlooking the extensive garden and paddock beyond.
A study with feature glass screening to the hall and an open plan kitchen diner and sitting room also lead from the hallway.
The bespoke kitchen has a range of units and integrated appliances inckuding a dishwasher, Neff electric oven and hob and microwave. A fridge freezer is also included in the sale. The room also benefits from a full-height ceiling with exposed timbers and recessed spotlights and French doors opening to a south-facing patio.
The sitting room is stunning and flooded with light provided by a gable end window and enjoying views overthe garden.
Two bedrooms and a recently refitted bathroom complete the ground floor.
On the first floor, an attractive master bedroom has a window with built-in seat overlooking the gardens and an en-suite shower room also refitted with a contemporary white suite including a walk-in shower. Another bedroom also has an en-suite bathroom.
Outside, the property is approached through a traditional five-bar wooden gate leading into the garden and grounds believed to be in the region of 1.9 acres.
The garage has a boiler serving the advanced central heating system, light and power.
A separate workshop off the garage also has light and power.
The gardens and grounds extend to the south, east and west of the property and incorporate an expansive paved patio area, lawn with ha-ha separating paddock, a side garden bounded by stone walling with further lawn stocked with huge range of colourful shrubs and plants.
A gravelled driveway provides car parking for numerous vehicles. To the east of the driveway there is a further lawned area with shrubs and bushes, a log store and a productive vegetable garden.
Within the grounds is a fully insulated garden building with light and power and sliding patio doors ideal for a home office, studio or gym.
Beyond the garden is a grass paddock with separate gated access, enclosed by post-and-rail fencing and featuring three inset trees.
The paddock is bounded in the east by a further wildlife area with a pond.
Home Cottage, in Main Street, Teigh, is on the market with offers over £1.1m asked for. For details call Murray on 01572 755555.
I am a 66-year-old high-school teacher in Tucson, Ariz. I have a home downtown, near the University of Arizona, which is valued at $610,000. I have about $105,000 left on my mortgage. I have two roommates who pay rent, which helps me pay off my mortgage.
It’s my ambition to retire in four years, and move closer to my daughter in Brooklyn. I’d like to be a snowbird, and keep my home that I own in Tucson, and possibly buy a condominium or co-op apartment in Brooklyn to spend spring, summer and fall. I want to keep my home in Arizona, so I can be around my son and my granddaughter in the winter.
Should I sell the house in Tucson in four years when I retire and put all the money toward buying a home in Brooklyn? Or should I keep the house in Tucson and rent an apartment in New York while I am there?
I am a little concerned about the lack of water in Arizona over the next 30 years, and summers are getting even hotter. I love Tucson. It’s a progressive place in a red state. Also, things could change for the worse.
Sincerely,
Big City Dreams
‘The Big Move’ is a MarketWatch column looking at the ins and outs of real estate, from navigating the search for a new home to applying for a mortgage.
Do you have a question about buying or selling a home? Do you want to know where your next move should be? Email Aarthi Swaminathan at TheBigMove@marketwatch.com.
Dear Big City Dreams,
I love that you’re moving to New York to retire. From personal experience, I’ve seen more college students or early career types move to the city, eager to make a mark. But I get that you want to be closer to your daughter, and also avoid the crazy heat in Arizona!
To answer your question, on whether to buy or rent: It really depends on how long you plan to be a snowbird and stay in Brooklyn. If you plan to stay for a long time (or forever), it may make more sense to keep the Tucson home and buy in Brooklyn, if you can afford it.
But if you’re not fully sure about moving to the Empire State for an extended period of time, it may make sense to rent and feel the city out before you plunk the cash down for a home.
“Renting in New York City right now is a horror show. ”
But a big red, flashing warning sign for you: Renting in New York City right now is a horror show.
One real-estate agent, Frances Katzen, who is with Douglas Elliman, told me that it’s gotten so competitive in the city to buy or rent that it’s really “Darwinism at its finest.” In Katzen’s view, the rental market is on a “sugar high.”
According to data from Douglas Elliman, the average rent for a studio apartment in Brooklyn is $2,824, as of this June. A one-bedroom would set you back $3,240 a month. Landlords can hike the rent much further, “because supply is so limited,” Katzen added, with demand rising as the back-to-the-office picture evolves.
Not only are you going to pay through the teeth in rent, you’re also going to be stuck with the mortgage on the Tucson home.
If you’ve got the financial means to do so, consider keeping — and renting — the Tucson home and investing in a home in Brooklyn as well.
Sure, buying a property in the city is a pricey proposition. Inventory is low. The median sales price for an apartment (whether in a condominium or a co-op and regardless of size) in Brooklyn as of the second quarter of this year was up by 8.2% to a new high of $985,000, according to another report from Douglas Elliman.
With rates averaging around 5.54% for a 30-year fixed-rate mortgage, that’ll push your borrowing costs up further.
But if you’re planning to stay in Brooklyn for a bit, given how high rental prices are, it may be a good move to put that money toward a second home.
You mentioned that you had roommates — so you’re familiar with running a rental. Since you’re planning to spend winters back in the desert, you could always rent out your New York place on Airbnb
ABNB,
or do a short-term lease in the winter, to get some income from the property.
And if you decide to keep the Tucson home, you’ll probably get around $1,800 in rent per month that could go toward your new mortgage (for what it’s worth, some investors are still banking on people moving to the Sun Belt). You’ll also have the flexibility of pulling the plug on Brooklyn, should that not work out.
Additionally, if you are intending to share your home with your daughter, perhaps she can help out with the bills, making the option to purchase a home a lot more attractive. She can also save a little bit of money on rent, if you decide to charge her below market rate!
Living in the city will be a special experience for you, as you’ll definitely have no shortage of entertainment options during your retirement. And living near your daughter will make it even more special.
Letters may be edited for style and space. By emailing your questions, you agree to having them published anonymously on MarketWatch. By submitting your story to Dow Jones & Company, the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
HARARE, Zimbabwe — Zimbabwe has launched gold coins to be sold to the public in a bid to tame runaway inflation that has further eroded the country’s unstable currency.
The unprecedented move was announced Monday by the country’s central bank, the Reserve Bank of Zimbabwe, to boost confidence in the local currency.
Trust in Zimbabwe’s currency is low after people saw their savings wiped out by hyperinflation in 2008 which reached 5 billion%, according to the IMF.
With strong memories of that disastrous inflation, many Zimbabweans today prefer to scramble on the illegal market for scarce U.S. dollars to keep at home as savings or for daily transactions. Faith in Zimbabwe’s currency is already so low that many retailers don’t accept it.
The central bank disbursed 2,000 coins to commercial banks on Monday. The first batch of the coins was minted outside the country but eventually they will be produced locally, according to the governor of the Reserve Bank of Zimbabwe, John Mangudya.
The coins can be used for purchases in shops, depending on whether the shop has enough change, he said.
“The government is trying to moderate the very high demand for the U.S. dollar because this high demand is not being matched by supply,” said Zimbabwean economist Prosper Chitambara.
“The expectation is that … there will also be moderation in terms of the depreciation of the local currency, which should have some kind of stabilizing effect in terms of pricing of goods,” he said.
Any individual or company can buy the coins from authorized outlets such as banks, according to an announcement by the country’s central bank.
People can buy the gold coins from authorized agents such as banks using the local currency or foreign currencies and purchasers can choose to keep the coins at a bank or take them home. Foreigners can only buy the coins in foreign currency, said the central bank.
Called Mosi-oa-Tunya, which in the local Tonga language refers to Victoria Falls, the coins “will have liquid asset status, that is, it will be capable of being easily converted to cash, and will be tradable locally and internationally. The coin may also be used for transactional purposes,” said the central bank. People holding the coins can only trade them for cash after 180 days from the date of buying, the bank said.
The coins, each weighing one troy ounce with a purity of 22 carats, can also be used as security for loans and credit facilities, said the central bank. The price of the coins will be determined by the international market rate for an ounce of gold, plus 5% for the cost of producing the coin. At the time of the launch Monday, the cost of Mosi oa Tunya coin was $1,824.
Internationally, gold coins are used in countries such as China, South Africa and Australia to hedge against inflation and as an investment opportunity, although they are not as widely used as currency as envisaged by Zimbabwe’s central bank, said Chitambara.
“For Zimbabwe we are in chronic hyperinflation so the expectation is that there will be a huge uptake of these gold coins,” he said. However, most Zimbabweans struggle with daily survival and won’t be able to buy them, he said.
“For the common man, there is not really much to benefit directly from this, especially if you don’t have any excess cash,” said Chitambara.
“Many people have no money for bread, let alone for savings,” he said. “The expectation is that indirectly it will benefit the ordinary person through moderating the prices.”
Companies with excess cash can find the coins useful to store value and also as an alternative investment asset, although individuals and companies are likely to continue preferring the dollar because “it is convenient and highly liquid,” he said.
Selling the coins in fast depreciating local currency could also result in “rent-seeking behavior, speculation and arbitrage within the economy,” as some could buy using local currency and then sell in dollars later, he said.
The fact that Zimbabwe’s central bank would have to buy the gold from miners of the metal such as informal artisanal miners could also present challenges and result in increased smuggling, analysts say.
“Gold deliveries in Zimbabwe have significantly recovered because of the appetizing U.S. dollar payments offered to artisanal miners,” noted securities firm Morgan & Co in a market intelligence report.
“However, should there be a disparity between the amount of U.S. dollars used to purchase the gold from miners and the U.S. dollars used to pay for the coins, this could squeeze the central bank and its intermediaries’ foreign currency reserves. If this ripples to artisanal gold miners, this could result in low deliveries to Fidelity Printers and increase gold smuggling activities,” noted the Morgan report. Fidelity Printers, a subsidiary of the central bank, is the country’s only authorized gold buyer.
Zimbabwe has substantial gold deposits and exports of the precious metal is one of the southern African country’s major foreign currency earners. Gold production improved to about 30 tons in 2021, compared to 19 tons in 2020, according to official figures. Small–scale producers such as poorly regulated artisanal miners contributed 19 tons of the gold delivered in 2021, according to official figures.
Gold smuggling has been rampant. The country is estimated to be losing about $100 million dollars worth of gold monthly to smuggling, home affairs minister Kazembe Kazembe has said. Smuggling is costing the country about 36 tons of gold annually, according to a report issued this month by the Center for Natural Resource Governance, a local natural resources watchdog. Legally all gold mined in Zimbabwe is supposed to be sold to the central bank, but many producers prefer to smuggle the gold out of the country in order to get payment in U.S. dollars.
Sam Mitchell is the CEO of Strike, an online estate agency which is “disrupting” the traditional estate agency model further by selling houses commission-free. Instead, the company’s app links buyer and seller together and Strike makes money from referral fees and selling upgrades (photos and services and suchlike) to the vendors.
He says that traditional estate agency ended when online portals launched. “They stripped away the mystique that agents held a secret key to market knowledge and buyers. We all have access to data these days, and everyone comes to the market better informed.”
Skirting tradition
One client of Strike, who didn’t want to give his name, sold his house in Putney, south-west London, for £1.6 million earlier this year. The process cost him just £450, which covered the cost of the photos, having a floorplan drawn up and an EPC (Energy Performance Certificate) done.
“Traditional estate agents would’ve charged me between 1 per cent and 2 per cent of the selling price, plus VAT. At the top end of that scale, that’s just shy of £40,000 – or the price of a new car. I’ve no doubt that agents can add value, but is it worth that much? I don’t think so.” After the vendor met with the representative of Strike and helped to write up the house description for the listing, it was put on Rightmove and within 10 days, after 10 viewings, was sold for the asking price.
Where vendors are motivated to do the legwork – those active on social media will often set up a marketing campaign on Facebook and Instagram – the online agency route can be successful.
Sophie Baden, 38, sold her house in Godalming, Surrey, using Purple Bricks. It was on the market for £490,000 and found a buyer within a week. “We did a lot of the work ourselves including the write-up, taking most of the photos, conducting the viewings during an open day – with tiny kids, we couldn’t possibly keep tidying up the house.”
Purple Bricks acted to list the property on the portals and provided a sale board. In order to vet buyers, Sophie asked a series of questions before confirming the viewings. “It was hard work, but we were very attached to the house and maybe that’s why we wanted to go the extra mile in finding the right buyer, rather than giving money to an estate agent for doing what, it turned out, we could do ourselves. I don’t think I’d ever use an agent now as I enjoyed the process so much.”
The Value Gap is a MarketWatch interview series with business leaders, academics, policymakers and activists on reducing racial and social inequalities.
People who want to buy homes increasingly have to compete with corporate owners who, armed with powerful tech tools, are pricing them out of markets and then renting back to them, according to a new report.
“Proptech,” short for property tech, is helping private-equity firms and venture capitalists exacerbate housing inequality, says a new report by TechEquity Collaborative, a member-based organization in the Bay Area whose mission is to inspire tech employees and companies to help address inequality.
Proptech includes property-management software, data trackers and algorithms that maximize profitability used by companies known as iBuyers, which allow for the buying and selling of homes online. Institutional investors are in turn using iBuyers like Redfin, Opendoor or Offerpad to scoop up single-family homes, outmaneuvering individual buyers because they’re privy to proprietary data and, in some cases, they can bid in cash, the report said.
The effects of all of this are most stark for communities of color, according to the report, which cites studies showing that corporate landlords are buying and renting out homes “concentrated in ZIP codes that average 40.2% Black, three times the national Black population of 13.4%.”
A Redfin spokeswoman said the company lists all its properties on the open market. “We want to give every buyer a fair shot to make an offer on the homes that we own,” she said. “Redfin has not made inside deals to sell homes directly to institutional investors and large single-family rental companies.”
An Opendoor spokeswoman said the “vast majority” of the homes it has bought were sold to individual buyers. “We are reinventing the traditional real estate transaction to be simple and certain for buyers and sellers across the country,” she said.
Offerpad didn’t immediately respond to a MarketWatch request for comment.
TechEquity Collaborative chief executive Catherine Bracy spoke with MarketWatch about the report, titled “Sold to the Highest Bidder: How Tech is Cashing In on the American Dream,” which shines a light on the growing problem and calls for more awareness and action.
“It’s depressing to me that decades after the civil-rights era, the racial wealth gap is worse,” Bracy said.
The interview has been edited for length and clarity.
Catherine Bracy is the CEO and co-founder of TechEquity Collaborative, a Bay Area-based nonprofit that works with the tech sector to help address inequality.
Ed Pingol
MarketWatch: How would you explain the problem in a sentence or two?
Bracy: The most fundamental element of the American dream, which is homeownership — with the white picket fence — is being pushed further and further out of reach for everybody. It’s being driven by economic forces coming from both Wall Street and Silicon Valley. Everybody has an interest in figuring out how to solve that problem.
MarketWatch: What is the public’s level of awareness of this issue?
Bracy: People have a high-level sense that something is really wrong here. Everyday people know that their housing costs are out of control. Rents are going up. Maybe three or four years ago, it was possible, but for people who want to buy a house there’s no longer an opportunity.
People on the ground know it’s happening. What’s been baffling to me is that regulators and the media have been slower to take a look at what’s going on here.
In the last couple of weeks, conversation about inflation has started to forefront housing more than it has. But mostly it has been about groceries and gas, without the attention that the cost of buying a house has been out of reach, when that’s a bigger driver of household budgets than gas or groceries.
I’m happy to see that starting to change, though [they may be] too late to the game.
MarketWatch: Will you talk a bit more about the tech piece of this? How is tech exacerbating the problem?
Bracy: The emerging proptech sector includes startups going up around residential housing, and also commercial real estate. This is a continuation of a much longer historical thread that even predates the recession. A lot of it is born out of the recession.
Now VC and entrepreneurs are seeing business opportunities based on what private equity has created. Potential homeowners are desperate; renters are behind the eight ball.
Venture capital is seeing opportunities to capitalize on that. We see business models taking advantage of the desperation around housing. People creating tools that help corporate landlords optimize their ability to buy property. It culminates in tech and VC seeing an opportunity.
An example on the homeownership side that we’re concerned about is rent-to-own models. Of course, rent-to-own has been around a long time. But innovative companies are putting a new sheen on that and targeting people who want to be homeowners. They’re new leasing models that promise to convert into homeownership, but are really predatory.
One of the most telling anecdotes in the report is a quote from a real-estate investor from 10 to 15 years ago, saying he didn’t see it as feasible to manage thousands of single-family properties at a time. [“How can you operate and create scale in that situation … I don’t know how anybody can monitor thousands of houses.”]
Now tech comes to the fore, creates the tools to automate management across thousands of properties. Now this guy is bullish on investing in single-family homes as rental properties. The technology has enabled private-equity investors to take over a larger share of single-family homes.
It’s not just that interest rates were low, or that HUD [the U.S. Department of Housing and Urban Development] created the programs. Tech provided the tools.
“‘Both regulators and companies themselves need to be looking at what they need to do. There could be potential harms they can’t anticipate or name today.’”
MarketWatch: How does all this affect communities of color?
Bracy: Private equity has targeted communities of color. Maybe not on purpose, but the ones with the most upside/potential for them are those communities that tend to be disproportionately Black and brown. They are putting homeownership further out of reach than 40 to 50 years ago. That’s really sobering.
We just had a panel looking at this issue in Atlanta. The Atlanta Regional Commission showed a slide that showed a one-to-one overlay between corporate ownership and individual ownership in the area.
This is harming Black families. It’s really scary to think about how we close the racial wealth gap without solving this problem of homeownership and role of corporate actors in exacerbating the pain.
MarketWatch: How did the Great Recession make way for all of this?
Bracy: There were programs coming out of HUD at the time. They were well-meaning, well-intentioned. The government wanted to get somebody to purchase these foreclosed properties and get someone in there so neighborhoods didn’t fall into blight. So government turned to private equity and created programs.
That was really the catalyst for private equity to enter this market. Obviously since then, other things have happened that made that a more enticing market for them.
It’s not clear to me that they would’ve turned to single-family ownership if the government didn’t create this program coming out of the recession. I don’t know that it would’ve been better for the government not to do this, though. It’s important to understand the historical context.
MarketWatch: It sounds like the government and tech have that in common: unintended consequences.
Bracy: That’s a really important point. What we have coming out of the Great Recession is the benefit of learning lessons. We know that tech, left to its own devices, doesn’t usually just benefit society if we aren’t vigilant about it. We have to be conscious about potential harms.
Both regulators and companies themselves need to be looking at what they need to do. There could be potential harms they can’t anticipate or name today. I’m almost certain that in 10 years we’ll be looking back and saying all this was avoidable.
MarketWatch: What are possible solutions? Who’s responsible? And is anyone working on solutions right now?
Bracy: On the corporate-ownership side, we really need to put some constraints on what’s possible there. I don’t know what the best financial lever is to make these single-family homes less attractive as an asset class.
How do you balance it all? How can individual families compete? Maybe helping them with down-payment assistance. Another part might be constraining the corporate and private-equity investors.
The racial wealth gap piece is a subcategory of this: How are we thinking about policies that make up for historical disparities? How do we pump wealth into Black communities?
The second piece, around tech, is about transparency and accountability. There’s a set of literature about how we regulate algorithms that can be applicable to the housing space.
If you’re a RTO company, is the data about how many people are converting from lease to ownership there? Are you tracking that, and how does that break down along racial lines?
They have to be conscious about what they’re doing, track it, make it public. Shining a light on it could create a more self-regulatory effect than we’ve seen so far.
Have these conversations internally. Create a consciousness. You’d be shocked at how many people who work at these proptech companies don’t know what redlining is. Maybe employees at those companies should speak up and say, “We should test this first.”
There’s not enough people sounding the alarm. The truth is we need a lot more people paying attention to this.
MarketWatch: The report mentions Atlanta as particularly affected by this issue. What other places around the nation are feeling the effects?
Bracy: It’s happening in the Bay Area, Los Angeles, New York — the coastal cities.
The thing we had going for us, though, in those places was a political environment that was open to creating solutions for people who would be most impacted. In California, there are housing bills that are trying to address these issues.
But other cities are in places where the political environment is hostile to renters in particular, like Phoenix and Austin. I worry about what that means for homelessness and safety in general.
In some places tech companies are starting to grow, it could be an issue. Some employees are leaving the Bay Area and going to places where they won’t protect people who will be driven out of their homes by the tech spike.
I don’t know how people think homelessness happens, but it’s going to start to look a lot worse.
Read more: Who can afford a home? Roughly 60% of the U.S. could be frozen out of starter homes, warns S&P
Don't let the cheap French property dream fool you – it's a lot harder than it seems
And just in case you do find the house of your dreams in an estate agent’s window or online, it’s likely that you can’t find where it actually is. “A village with all facilities”, “a pretty hamlet, a short distance from…”, replace not just street names, but the name of the actual place. This is because houses are often represented by multiple agencies and each one wants you to sign up with them before divulging where this house might be, so they don’t have to share the spoils with others. They also don’t want you making a private deal with the seller.
Buying somewhere here is a bigger commitment than in many parts of the UK. If you buy somewhere on a whim, do lots of work on it, and then think you can flip it at a profit because the area doesn’t quite suit or your circumstances change, you may come a cropper. Property prices are usually worked out per square metre and unless the house is exceptional, or in an exceptional location, the price won’t go up because you spent a fortune on pretty wallpaper or a new kitchen.
And bear in mind when we lose our hearts to a wreck, a fixer-upper, a bargain, few of us have the skills to “do it up on a shoestring”, however many episodes of Escape to the Château we’ve watched. Work costs money, and lots of it. Just as in the UK, Covid has increased the price of materials. Good artisans get booked up far in advance, and are worth waiting for. We’ve found the quality of the work on our house to be excellent. Don’t be tempted to cut corners. Works on gas and electrics, even having your chimneys swept each year, requires a certificate for your insurance, and you need to keep them for when you might want to sell.
But the heart wants what it wants, doesn’t it? I don’t regret for a single second embarking on this adventure, and if this summer you go from looking in estate agents’ windows to stepping inside their doors, I wish you the very best of luck.
Read last week’s column: French children don’t sit with screens at the table – and they don’t throw tantrums either
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