We tried to deal equitably with the differences in ownerships costs between possibly comparable* urban areas in Spain and the United States in the previous post. Now we're going to look at the relative rewards.
For the two apartments worth, respectively, 265,000 dollars and 405,000 euros we assume:
1). A 3.5% 30 year mortgage for 100% of the value;
2). An inflation rate of 1% per year, applicable to taxes, fees and the owners paid off equity, over the entire period.
In the Chicago example, by the time the mortgage is paid off the owner will have spent 411,951 dollars on fees and taxes and will have full, unencumbered ownership of a flat worth 302,736 dollars - a meagre 73% of the expenses paid.
Our madrileño, on the other hand, will by 2039 have disgorged 189,411 euros supporting a purchase which will then be worth 462,673 euros - 244% of what he or she is out of pocket.
In the interests of fairness, we've also calculated this in the event that electricity, heat and water are included in the monthly fee in the US example. Adding 1800 euros a year to the first month for the place in Madrid, then increasing it by the same one percent a year (first person to cite their January natural gas bill as proof that our annual figure is wrong loses their voting rights), we come up with the 2039 value of 183% of expenses paid.
This is what is called a 'no brainer'. One gets lots of bang for their housing buck in this country. And anybody that insists that Spanish housing prices, on the basis of price to income (or anything else), should track a trajectory etched in North America simply does not know what they are talking about.
*One reader, rightfully, questioned whether we were making a justifiable comparison. It's a hard question to answer - and these two countries are so different that there is no proper way to do it. But our guess is that the Chicago example is, despite the rakish appearance of the building, at the lower end of the price scale. It was built in 1969, is being sold 'as is' (meaning it needs repairs) and seems to be located a few kilometres outside of the centre of the city. At the lower end also, one can find similar square metres in, say, Alameda de Osuna at 400,000 euros.
We have readers in Chicago who should feel free to point out errors, omissions and plain old stupidities via the comments section.
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1 Comments:
the first 1 million of interest is tax deductible in the US.
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