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From the Appraiser's Perspective: Home values in the United States vs. those in the United KingdomCharlie W. Elliott Jr., MAI, SRAhome cost in the US and UK, survey We hear a lot about the prices of homes here in the United States and not so much from the United Kingdom. However, 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. It's 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 the United Kingdom, 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 about 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 about 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. In the absence of 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 of side items in an average restaurant here might cost about $8-10. There, the same meal (but not as good, I might add) was 8-12 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 United States. I found the same to hold true to hotel rooms. A good quality room here that rents for $100-200 per night seemed, in my mind, to be about 100-200 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 air conditioning and a private bath. Given the high costs of these items in the United Kingdom, how did real estate stack up in my unofficial survey? My survey was twofold. 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 200-300 pound range, with two-bedroom units starting at 300 and going past 500 pounds. Don't forget that we are talking pounds here, not dollars. To discuss dollars, we must, for all practical purposes, double the amounts. It was also revealing to compute the price-per-square-foot of finished space where sufficient data was available. When converting from pounds to dollars, it was not unusual to see these properties advertised at prices of $500-1,000 per square foot. This was in London, and that makes some difference when compared to areas outside the city. My second and third surveys - more scientific ones - were to research home-sales statistics. These statistics were for the entire United Kingdom, not just London. Both surveys produced similar results. These figures are listed as follows for the average typical house in the United Kingdom. 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 pounds -The HBOS Report (July 2006): 176,509 pounds -Average (rounded): 172,000 pounds -Average (converted and rounded): $330,000 The following represents the mean cost of housing in the United States at a comparable time: -National Association of Realtors (June 2006): $227,500 The above shows the average price of a home purchased in the United Kingdom to be about 30 percent higher than that in the United States ($330,000 vs. $227,500). There are other factors, of course, that may enter into this discussion to provide a true comparison. A few that come to mind would be the average income comparisons between the United Kingdom and the United States and 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 cited previously but should be considered is that it is not at all unusual for multi-family homes in the United Kingdom to be on leased land, creating another cost of ownership not always reflected in the price of the home. A bit of information that 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 than 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 a different 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, [email protected] or through the companys Web site at www.appraisalsanywhere.com. Previous columns he has written for The Mortgage Press can be seen on the Elliott & Company Web site.