Whenever I hear or read talk of a bubble, I start looking around at values in other places in the world. One of my favorite places to look for this is in the Friday Wall Street Journal. If you think prices are high where you are, just get that paper and you’ll see. New York City always stands-out for their extreme property values, for example.
I was traveling last week to the east coast and found a lot of ads for Florida property in the airlines’ iinflight magazine. The ad that caught my eye was for new condos in Sunny Isles where the prices start at $4,000,000 and top out at over $28,000,000. That twenty-eight million is for just one unit!
I got home and picked up the September 5, 2016 Los Angeles Journal and read about the latest sale on Rodeo Drive in Beverly Hills. The House of Bijan building just sold for $122,000,000! That is $19,405 per square foot, and the buyer is going to tear the building down. If you are thinking that was a rare event the last sale in that area was by Chanel Inc. for their new building at $152,000,000.
You’re probably wondering what this has to do with a bubble. Probably nothing but here is my thought: these people paying these huge prices probably have support teams feeding them tons of research indicating that there is no bubble, so do I really need to be worried right now with a potential bubble? My second thought is the prices, especially for the Rodeo property. Those prices are at an incredible price-per-square foot, especially if you look at the price for most of the income property we can buy today. That leads me to believe there is plenty of room for values to increase before we catch up to these prices.