Tuesday, July 10, 2007

Foreign Real Estate Bidders and Superstar Cities

In Today's New York Times, David Leonhardt picks up on a theme that I've been arguing for a while now. Foreign buyers are bidding up housing prices in Superstar cities ranging from New York, to Vancouver to Los Angeles.

I emailed Ed Glaeser that this group represents a potentially important source of local demand in certain cities. Take a look at his new paper (see
* Housing Dynamics (May 2007) Edward L. Glaeser and Joseph Gyourko
http://www.economics.harvard.edu/faculty/glaeser/papers.html) and you will see a complex setup but with this omission that the New York Times points out today.

"The upper end of the market has also been helped by an influx of well-off foreign investors whose buying power has grown with the recent decline of the dollar. Hard as this may be for an American to imagine, New York, San Francisco or Miami can now seem like a bargain, compared with London, Moscow or Sydney. Jason Haber, an agent with Prudential Douglas Elliman in Manhattan, said he had recently taught himself how to convert square feet into square meters — you divide by 10.8 — because of all of the international buyers traipsing through New York apartments."

These buyers are unlikely to be interested in suburban housing so it would interest me to see some academic work focused on exchange rates, foreign real estate prices and U.S center city real estate prices in "Superstar Cities".