Can Cars Destroy Real Estate Values?

Despite the recent pullout of Mitsubishi from Australia, we are not talking here about the demise of the Australian car industry

Ever been to Zermatt, Switzerland? No cars are allowed in the whole town. There are some electric carts and horse carriages. It is absolutely relaxing walking about town with no polluting cars to disturb the tranquility.

Fast forward to Sydney or Melbourne's freeways into the cities. Every morning cars are backed up for km's and even worse at the entrance to the cities. It is not uncommon to take 30 minutes for that dreaded last "k" into town. Once there parking is the next nightmare.

Often a pedestrianised mall is one of the few no-go places for traffic. Water fountains are common, whilst people can sit and relax in cafés and socialise, or just people watch.

It is so blatantly obvious that car free areas thrive and yet it seems that man enslaves him selves to serving the servant of mobility. Wherever piece and quite rules, real estate prospers and people enjoy themselves. A combination that is hard to beat.

Alternative transportation methods, such as a credible train/metro system would allow people to reclaim our towns and make them ours again.

We live in hope!

Simon Turner simon@marquetteturner.com.au

Aspen Real Estate Prices are "Nothing Special"

Aspen Ski Resort in the US sounds expensive just thinking about it. It might look cheap or expensive compared to the budget you have for buying real estate and secondly it might look cheap or expensive compared to other luxury real estate in other US ski resorts.

The first price distinction is a personal matter; it just depends on your budget. If your budget is $US100,000 to buy a vacation apartment, then Aspen will definitely look expensive to you.

But if your budget is $US2 million for a two-bedroom condo and you are comparing it to other luxury resort towns you will find that Aspen prices are not outlandish anymore. Back in the heydays of Aspen becoming a hip place its prices always bordered on the insane. It used to really take a leap of faith to buy.

That is what changed. Aspen apartments in the central core of town range from about $US1,400 to $US1,800 per square foot depending on level of finish, age and location. International real estate prices like London and Dublin have far outpaced Aspen and tourists often go bargain hunting for real estate in Aspen.

As Aspen is fast becoming an international destination resort the weak US Dollar is turning real estate prices into bargain basement levels for a large swath of wealthy individuals. The British Pound is hovering around 2:1 to the Dollar and the Euro is at an all time high nearing 1.50:1 to the Dollar.

Aspen, with its 5,000 single-family homes and 5,000 apartments between them are on an even keel with standard Manhattan Real Estate and we are not talking the Fifth Avenue places that demand prices of up to $6,000 per square foot. Just that fact should ensure that real estate in this little town will do well in the future as Aspen is a special place at currently an “un-special”price.

Posted by Toby Munk on 02/23/2008 at 06:23 PM
Aspen Real Estate

Buy One House, Give One Free!

Donating money to charitable causes is all very well and good, but there's usually an abstractness about it that makes one wonder if the funds are really helping those who need it. A new project by California eco-urban design firm LJ Urban aims to make giving more concrete—quite literally—by matching its sales of homes domestically with funds to build homes in the impoverished African nation of Burkina Faso.

LJ Urban has designed a new eco-urban community of 35 LEED ND Certified homes in the urban core of Sacramento, its home town. The community is suggestively named Good, and for each home within it that gets sold, LJ Urban has committed to funding the complete training of a West African mason to build sustainable homes for families in Burkina Faso.

By partnering with the Association La Voûte Nubienne (AVN), which has already trained about 60 local masons to build durable homes out of earth bricks and mortar, LJ Urban aims to go beyond just providing homes to impart enduring skills and jobs to the local community. Taking the notion a step further, LJ Urban has also opted to skip the expensive marketing campaign to promote its Good community, and to use that money to train more African masons instead.

So, for every 100,000 people who visit LJ Urban's new, dedicated website by July 1st, the company will fund the complete training of another local Burkina Faso mason—up to 20 in all through this viral approach.

The Good project was inspired by Toms Shoes, a project that donates a pair of shoes for every one it sells. "[That] approach captivated us because it broke through the 'charity fatigue' all of us have felt at one time or another," LJ Urban's team explains. "The question then became: 'What if we could do something like that with our houses?'…" The project is also reminiscent of One Laptop Per Child's (OLPC's) "Give One Get One" campaign last year through which consumers could donate a laptop and get one for their own use at the same time. A model of giving to bring to your neck of the woods...?

Website: http://www.dosomegoodnow.com/
Simon Turner simon@marquetteturner.com.au

A Little Inflation Is Like Being a Little Bit Pregnant

HAVING a little bit of inflation is like being a little bit pregnant. Is that old adage worth bearing in mind as consumer prices across the globe accelerate? Marquette Turner takes a look at what's going on.

According to an index produced by Goldman Sachs, global inflation was 4.8% in the year to November, two percentage points up from the previous year. Prices accelerated in 80% of the countries that Goldman tracks.

By historical standards, this is all small fry. An inflation rate of 5% hardly marks a return to the double-digit price increases that haunted rich countries in the 1970s and emerging economies for far longer. (For much of the 1990s, the average inflation rate in poor countries was 50%.)

Nonetheless, the upswing is broad enough to pose awkward questions. With ever more signals, from weak retail sales to rising joblessness, pointing to an American recession, is the world headed for a bout of stagflation-lite? And will stubborn price pressures constrain the marked easing of monetary policy that America's central bankers now promise?

As The Economist reports, the answers depend on what has been driving inflation up and whether those pressures persist even as economies slow. Ultimately, inflation is a monetary phenomenon, so responsibility lies with central bankers.

Pessimists point out that monetary conditions have been loose in recent years, with real interest rates low and credit growth rapid, particularly in emerging economies.

Others worry that the task of central bankers has become harder as globalisation has shifted from being a disinflationary phenomenon to an inflationary one. The downward price pressure from cheap Chinese goods may be abating while the developing world's rampant demand for resources may continually drive commodity prices higher.

There is some truth to these arguments, but none offers a complete explanation of recent price trends. In some emerging economies monetary laxness is clearly fuelling inflation—in the Gulf states, for instance, as the direct consequence of their dollar pegs.

But elsewhere the picture is less clear. Take China, where fears of social unrest have made inflation one of the government's top concerns and have led it to impose various price controls over the past week. The accumulation of vast foreign-exchange reserves has fuelled domestic money growth and the inflation rate has tripled in the past year. But that rise is almost entirely due to a jump in food prices, particularly of pork. Core inflation (excluding food, but including oil) is running at only 1.4%. Pig disease deserves more blame for China's recent inflation than loose policy. What's more, China's monetary conditions are tightening fast.

More important, China's productivity is growing faster, by 20% a year, according to America's Conference Board, a research organisation. That means overall unit costs are still falling.
It is true that the prices of imports from China are rising after several years of decline. But that has more to do with the weakness of the dollar than with increasing Chinese production costs. And even if the prices of Chinese goods rise, they could still dampen inflation in richer economies, because they are much cheaper than domestically produced equivalents and are gaining market share. As China produces higher value items, it will push down prices of domestically produced goods in ever more industries.

A more direct link between developing countries such as China and inflationary pressure comes through commodity prices. The prices of many raw materials have surged in the past 12 months. The food index is up by almost 50%. The price of oil has risen almost 80%. These jumps are the main cause of higher inflation across the globe. They are also related, at least in part, to structural changes in the global economy.

The world economy is increasingly powered by countries, such as China and India, whose growth is far more energy- and commodity-intensive than that of rich countries. Since 2001, China has accounted for about half of the increase in the world's demand for metals and almost two-fifths of the increase in oil demand.

This shift means that the usual relationship between America's business cycle and commodity prices may change. Past American recessions have sent the prices of oil and other resources down. That may no longer be so. Economists at HSBC say that the correlations between industrial output and commodity prices began to fall apart a few years ago.

But that does not mean commodity prices will continue to surge. Emerging economies may be more resilient to an American recession than hitherto, but they are unlikely to grow faster. At the margin, therefore, the demand for commodities will slow. And in the longer term, higher commodity prices will eventually lead to greater supply. Much of the surge in raw-material prices in recent years reflects the fact that few foresaw the pace of emerging-market growth. All of which suggests that, even if commodity prices don't fall, their rate of increase will ease, and the biggest driver of recent global price pressure will weaken.

Given the American backdrop, the Fed's recent decision to step up the pace of interest-rate cuts is understandable. The weak economy poses a bigger danger than inflation. But there are risks. Even if commodity-price inflation wanes, the falling dollar means America faces other inflationary threats. And if overall price pressure remains stubbornly elevated, inflation expectations may yet rise. If that happens, the Fed will face the unenviable task of curtailing its easing or even raising rates while the economy is weak.

Simon Turner simon@marquetteturner.com.au