Q: What’s happening to the real estate market in San Francisco?
A: During my time in San Francisco, I have learned a lot about the tech and startup culture, but I have also learned that there are very few places in the world that are more expensive.
Based on a Demographia International Housing Affordability Survey of 360 cities in 9 countries showed that San Francisco was the third most expensive place to buy real estate, just behind Hong Kong, at number one, and Vancouver, at number two. The research used a metric called a median multiple, which compared the average house price with the median yearly income for the market. Using this calculation, Hong Kong’s average home price was 14.9 times its median income. Vancouver came in at 10.3, and San Francisco unfortunately had a 9.2, up sharply from 7.8 last year.
Based on information from AreaVibes, it is about 1.5 times more expensive to live in San Francisco than it is to live in New York. If you take a cost of living index that is based on a national average of 100, you will reach a score of 233 for New York and a skyrocketing score of 339 for San Francisco.
Let’s look on a graphic provided by Paragon Real Estate.
Having a quick look on the Case Shiller Index (widely considered as a reference), we can see an increase of 45% in the real estate market for the SF and the Bay Area. If we focus on just the city of San Francisco, the increase in price is even more impressive: between 2012 and 2014, real estate prices have increase by 70%, and by 20% just in 2014.
Based on the following three factors, it is very hard to believe that this upward trend will be stopping anytime soon.
1) The traction of San Francisco is just enormous
2) The interest rates are low and even if they increase, it shouldn’t be a steep increase
3) The stock of real estate property is very limited. So a very small offering and a huge demand have created skyrocketing prices
But if you are still convinced to buy real estate in San Francisco, be prepared to pay between $10k-13k/m2 around the Belgian Trade office in the Financial District. However, if you want to add a nice view on top of a skyscraper, the price will be around $21,500/m2 which makes about $4.7 million for 250m2 in downtown SF.
And what if earthquake happens? But no risk no fun.