What $1 Million Buys In Homes Around The World
09.18.08, 4:00 PM ET
It has been a dark week for Wall Street and an even gloomier year for U.S. real estate.
But in some areas of the globe, luxury homebuyers are seeing sunny skies.
As housing prices continue to tumble--down a record 4.8% in the second quarter of 2008 from the same time the previous year, according to the Office of Federal Housing Enterprise Oversight--those looking for a new home in the million-dollar range are getting a lot more for their money. The deepening subprime crisis in states like California and Florida, and in wealthy zip codes, means dream homes and investment properties are being added to the foreclosure list. In Los Angeles, for example, homes in the $4 million to $5 million range would have cost buyers an additional $1 million last year.
Those looking in Europe aren't as lucky. The dollar's decline means $1 million buys you much less. In Paris, many buyers pay for location and make do with apartments smaller than 300 square feet.
In recent years, Americans have been investing in developing countries like Costa Rica, where the same amount will buy you 5,000 square feet of marble floors and Roman columns in lush surroundings.
For our look at the world's property markets, Forbes.com examined five U.S. cities and 20 spots abroad, focusing on locales where U.S. investors did business or traveled for vacation or retirement. In each city we selected a million-dollar home that was emblematic of the market. In some cities $1 million homes were scarce, with the price point either far above or far below the market average.
The weakening housing market stateside has given British nationals an in. They have been snapping up U.S. properties, seizing on the strength of the pound against the dollar.
"The Brits are among our top buyers in New York," says Royce Pinkwater, senior vice president at Sotheby's International Realty. "There is a lot of wealth there, and it is a natural transition for them because we are English-speaking."
What $1 million buys in:
However, the dollar's growing strength, coupled with the housing market's instability, may change this. Pinkwater says the currency's comeback, among other factors, is causing Brits to cool their U.S. buying frenzy.
"They are sitting back and taking a break to some extent," she says. "They're hoping the real estate market will keep going down."
But in many U.S. cities, inflated real estate prices can hold firm or slide only slightly in the city center even as they collapse in the surrounding areas, says Richard Green, economist and director of the Lusk Center for Real Estate at the University of Southern California.
"In the inland areas of Los Angeles, you can get a 4,000-square-foot house--a huge house," he says. But in popular Santa Monica or Marina Del Rey, "You'll get a shack."
In New York, $1 million offers a bit more flexibility than it did at this time last year.
"Hell's Kitchen is getting really good values. There you can get 600 or 700 square feet with amenities," says Julie Pham, a vice president at the Corcoran Group.
But those hoping to discover an outer-borough gem are probably out of luck, she says. "Unless you're willing to walk a pretty long distance from the subway, it's not going to be a big discount."
A few of the homes we found showcase cities with unusual housing patterns, like Mumbai, where a short housing supply contributes to high prices.
"You're seeing New York prices on apartments," says Green. "It's very hard to build anything there because of zoning laws. And while the average income is very low, there are a small number of very wealthy people all bidding for the same properties."
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In London, where even one million pounds isn't likely to get you far, $1 million gets you an unimpressive one-bedroom apartment--one that may not even meet the American definition of a one bedroom.
"A good studio here would probably look like a one-bedroom there," says Pinkwater. "It's really tight."
Pinkwater says the city's real estate market is unhealthy.
"The market is definitely weaker in London, and I think it will become weaker still," she says. "It has become very, very expensive and now people are watching that market flounder."
Still, says Pinkwater, properties priced $10 million and up aren't going anywhere.
"The top end," she says, "will always be the top end."
What goes for a million bucks here in Vancouver? Post your best MLS listings here.