Appraisal Service Anywhere In The United States
Home Values
in the United States vs.
those in the United Kingdom
By Charlie Elliott, Jr., MAI, SRA
We hear a lot about the prices
of homes here in the United States and not so
much from our mother country or the United
Kingdom. We do seem to hear that the prices of
everything in Europe, especially in the United
Kingdom, are much higher than here in the good
old United States.
Recently while on a trip to London, I decided to
do some comparison-shopping. Not that I had
expected to buy a home there, but I did my share
of eating at restaurants, staying at hotels and
shopping in general. I also took note of some of
the advertisements for houses in London. I
expected the home prices in London to be higher
when compared to the less populated parts of
Great Britain, but at least I got an idea of
what it would cost to own a piece of the Queen’s
land.
Even though I was warned to be prepared for
English sticker shock, I was not fully prepared
for what I found there. At the time I was there,
the British pound (£) was trading at bout 1.92
times that of the U.S. dollar. In other words,
it took almost $2 to buy what a pound would buy.
This within itself did not seem to matter a
whole lot in that what a pound would buy seemed
to be the most important. Well, to put it
mildly, a pound would not buy a whole lot.
Without a scientific survey most food and
lodging seemed to cost in pounds about what you
and I would pay here in dollars for an item. An
example would be that a hamburger with a couple
side items in an average restaurant here might
cost about $8 to $10. There the same meal, but
not as good I might add, was 8 to 12 pounds. A
little quick math tells us that the cost of food
there is about twice of the cost of what we find
here in the States. I found the same to hold
true on hotel rooms. A good quality room here
that rents for $100 to $200 per night seemed, in
my mind, to be about 100 to 200 British Pounds
there. We are not talking about anything fancy,
just a small room that had air conditioning and
its own bath. By the way not all rooms there had
AC and a private bath. Given the high costs of
these items in the British Isles, how did real
estate stack up on my unofficial survey?
My survey was two-fold. The first of the two was
the least scientific. I skimmed through a number
of newspapers and magazines with ads offering
apartments for sale. These were, for the most
part, new units in town with no special
amenities from what I could determine. While
prices varied greatly, it was not unusual to see
one-bedroom units starting in the 200-to-300
pound range with two-bedroom units starting at
300 and going past 500 pounds. Don’t forget we
are talking pounds here and not dollars. To do
that we must, for all practical purposes, double
the amounts to get to dollars.
It was also revealing to compute the
price-per-square-foot of finished space, where
sufficient data was available. When converted
from pounds to dollars it was not unusual to see
these properties advertised at prices of $500 to
$1,000 per square foot. This was in London and
that will make some difference when compared to
areas outside the city.
My second survey, and a more scientific one, was
to research home-sales statistics. These stats
are for the entire United Kingdom, not just
London. I found two different surveys each
producing similar results. These figures are
listed as follows for the average typical house
in Great Britain. This is what we refer to here
as the average or mean cost of a house in the
United Kingdom as a whole.
-
Nationwide Monthly House
Price Index August 2006 £167,721
-
The HBOS Report July 2006
£176,509
Mean Average (Rounded)
£172,000
Mean Average (Converted
and Rounded) $330,000
The following represents the
mean cost of housing in the United States at a
comparable time.
The above represents a cost of
the average price of a home purchased in the
United Kingdom to be about 45% higher than that
in the United States ($330,000/$227,500). It is
acknowledged that there are other factors, which
may enter into this discussion, to provide a
true comparison. A couple that come to mind
would be the average income comparisons between
the United Kingdom and the United States, as
well as what an average house would be in
Britain as opposed to in our country. While the
scope of this article is not sufficient to
properly address these issues, it would be my
opinion that, in both cases, conditions in the
United States favor my contention that we’ve got
it good here and that we should appreciate our
situation. Another variable not sited previously
but in the mix, is that it is not at all unusual
for multifamily homes in Britain to be on leased
land, creating another cost of ownership not
always reflected in the price of the home.
In conclusion, a bit of information, which I did
not heretofore reference, is that of
conversations that I had with various people,
including one corporate executive from outside
the country who travels to the United Kingdom
regularly and employs many people there. I asked
how it is that the Brits deal with the high
prices. Are their incomes such that they have
more spendable income that we would here in
America? The response was, quite to the
contrary. Most, according to the executive, earn
no more, if as much. Their taxes are higher and
they generally accumulate less wealth than their
American counterparts. They live in more of a
socialistic society with free health care and
other government benefits. Many don’t expect to
acquire wealth and rely more on their government
for taking care of them when they get old.
America is still the premier land of
opportunity. We are very fortunate to live here.
Charlie W. Elliott Jr., MAI, SRA, is President of
ELLIOTT® & Company Appraisers, a national real estate appraisal company.
He can be reached at (800) 854-5889 or
charlie@elliottco.com or
through the company’s Web site at
www.appraisalsanywhere.com.
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