Tucson Cheaper Than Medellin? Maybe So, But…
Property is cheaper in Tucson than in Medellin…or so a reader wrote this week to assure us.
Specifically, this reader wrote to explain that you can find an apartment for as little as US$60 per square foot in a middle-class Tucson neighborhood. So why should he (or anyone) get excited about prices in Medellin, which we quote as low as US$93 per square foot.
The reader continued to tell us that, in his estimation, the cost of living in Tucson (where he’s living now) is comparable to that in Cuenca (where he has spent time).
Then he goes on to qualify this statement by saying that the cost of living in these two cities is comparable if you ignore property taxes, HOA fees, health insurance, and medical care, which he admits are all more expensive in Tucson. But, he maintains, taking those costs out of the equation and focusing on real estate prices only, you can’t beat the U.S. Sun Belt in this post-bubble age.
You can decide to ignore every other cost-of-living factor about a place you’re considering for living or investing and make a comparison based on real estate prices only…if you like. However, if you do, you’ll need to compare apples to apples.
I hate to break the news to the reader in Tucson, but we must have a different definition of middle class. After slogging through hundreds of online property listings for Tucson, I finally found a place that appeared livable from the pictures. It was priced at US$70 per square foot. Maybe it is located in what is considered a middle-class neighborhood. I know Tucson only historically, not currently (I grew up in Arizona). Going by the pictures, though, I’d say that neither the house for sale for that price in Tucson nor the neighborhood where it’s located are as nice as what you can buy in Medellin for the same price.
That said, big picture, my new reader-friend is right. You certainly can buy cheap in the Sun Belt. You can also buy cheap in Detroit and many other places in the United States right now. I wouldn’t want to live in any of those places or in any of the cheap properties that I found in my research for Tucson. But they exist.
The places I found in my online research on Tucson that seem to compare in quality of construction and location with El Poblado in Medellin (the neighborhood we’re typically referring to when we give price references for that city) worked out to about US$130 per square foot.
The reader who contacted me pointed out they have great weather in Tucson (comparable to the weather in Medellin) for maybe six months a year. He ignores the other six months of the year, when you’ll need around-the-clock air conditioning or you’ll risk death. Daily highs hover around 100 degrees for at least five months of the year in this part of Arizona.
But let’s leave utility costs aside…just as we’re leaving property taxes, HOA fees, health insurance, and medical care costs aside.
Let’s strip away everything but the cost of real estate. Where does that leave us?
In a rundown neighborhood in the middle of the desert. Again, I speak from firsthand experience. I lived in this part of the world for the first 25 years of my life.
I’ll take Medellin any day.
Sarcasm aside (I admit that I can get carried away), one important point to make in this context is that an apples-to-apples comparison of real estate prices can be difficult, not only between Tucson and Medellin, but between any two places in the world.
The first step is to break the prices being compared down to dollar per square meter (or per square foot). However, once you’ve done that, you have to also next do what an appraiser in the States would do. You have to factor in things like location, amenities of the property, amenities of the area (shops, hospitals, etc.), and quality of the construction (I’m not interested in living in a mobile home no matter how cheap it is).
You can’t compare the cost of an apartment in the center of Paris with the cost of a farmhouse in Iowa. That’s an extreme example, but it makes the point.
P.S. The reader from Tucson also pointed out that you can get a 20% yield on rental properties in that city right now. I have to wonder if it’s worth the risk. If your tenant can’t afford a house that costs US$40,000 with interest rates as low as they are today, how is he going to pay you US$700 a month in rent?