So inspiration hit me in Montreal this weekend after some drinks. It wasn't the alcohols effects that caused it (I swear!!!), but the not so wonderful cost.
When I went to school in Burlington VT ('97-'01), my friends would frequent Montreal for numerous reasons. A few that come to mind were the beautiful scenery (a.k.a. strip clubs), the drinking age of 18, and the fact that they could go out to eat, get surf and turf, appetizers, and drinks for $25 American.
Not so anymore..... the same principle definitely effects peoples purchasing decisions in most realms, Real Estate included. I found an interesting article http://travel2.nytimes.com/2005/05/29/realestate/29lizo.html?ex=1154059200&en=399b29e55613ce54&ei=5070 titled Who Needs the Riviera, that focused on a small group of Europeans taking advantage of their strong Euro in the American Real Estate market. The article also indicated that it wasn't necessarily a small group of Europeans settling in the area.
The current exchange rates are not just favoring those with a strong Euro versus the Dollar, however it also appears to be fueling some currency speculation through housing. Another article http://www.myrtlebeachonline.com/mld/myrtlebeachonline/business/15045250.htm South Korean cash flows into U.S. real estate shows a perfect example of the reasoning behind the speculation.
They (wealthy Koreans) are betting that the U.S. dollar will strengthen, causing the value of their U.S. holdings to appreciate when converted into Korean currency, and that even slower home-price appreciation in the U.S. will continue to beat returns in Korea, where high taxes on real-estate profits discourage speculation.
With interest rates on the rise, I think that their guess that the US dollar will strengthen, is a very educated guess.
So is this a good thing or not? Well it depends on who you are.
If you're a homeowner worried about the value of your home in an uncertain market, this should ease some of your stress. Foreign investment can be a great thing for homeowners in a certain area. The increase in demand and foreign money to an area that did not have it prior, will absolutely help increase/sustain property values of other homes around the area.
For those of you still renting waiting for just the right time......If you're going to be in the same area for a few years, and you have good credit, the best time is now.
And for potential investors just waiting around for the bubble to pop and great deals to start popping up from people who overextended themselves, it appears as though you might have some foreign competition on some of those purchases.
Jon Ernest is the Principal Broker of Spotlight Realty. A small, independently owned, full service residential real estate agency in Brookline, Massachusetts.
http://www.SpotlightRE.com
Condos for sale
See this article and other rants and raves on my Cambridge Brookline Boston Real Estate Blog
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