Which is your preference: Higher food prices or higher property prices?

Which is your preference: Higher food prices or higher property prices?

The image below showed my breakfast on one morning in Anaheim, Los Angeles. It’s by a chain called Coco’s and the price is a special promotion currently. Instead of US$13.99 (RM61), it was just US$10,00 (RM44). As usual, the typical tip the restaurants expect would be 15 percent, so it’s higher than US$10. It’s not compulsory to tip but you know… the people say that’s how they have enough salary because their salary per hour is not high enough.

The portion is enough for 2 persons actually, so we can say that per pax is just US$5 + tip. I would think this is cheap enough? Then, my college friend who’s now an American citizen pointed out to me that the property prices in Los Angeles is much higher than the national average. So, people are struggling to own their own property and thus, the number of homelessness does not go down. You can see the image below showing the homeless sleeping inside tents in Los Angeles downtown.

My friend stays in Whittier and the median property price is US$817,000 (RM3.6 million) Info source: https://www.redfin.com/city/20869/CA/Whittier/housing-market

What happens if food prices become higher?

After having breakfast in Taco Bell, Carl’s Jr, IHOP and a few other chains, it is safe to conclude that a breakfast with coffee will set us back around US$8 (RM35). Anything lower than US$5 does not come with coffee yeah. Their coffee is either refillable in some diners or it’s already a super big cup, so it’s highly unlikely that you need a second cup. The median salary for people working in Los Angeles?

It’s US$73,000 (RM320,000) per annum. (Info source: https://gusto.com/resources/research/salary/ca/los-angeles)

In other words, around US$6,000 per month. If they spend just US$8 per meal, that US$24 per day or US$720 per month. In other words, food prices would only be around 12 percent of their monthly median pay. This leaves them with more money for other stuffs, for example, property rental or property mortgage payments.

With a median property price of US$817,000 the typical mortgage one would have to pay per month would be as follows:

With a 20 percent downpayment, the mortgage is US$4,885 per month. With a median salary of US$6,000 and minus the US$720 for food, it’s US$5,280 remaining and after deducting the US$4,885 a typical person may not have enough for car loan payment and also for petrol, electricity and other expenses too. This is why it’s really not easy to buy a property unless one is earning a higher than average median salary.

So, food prices cannot go higher because if it gets higher, then the affordability of the property becomes ever harder. When property prices keep rising, the good prices would have to stay affordable. Else, it’s going to be a double whammy.

Is Malaysia cheaper then? Not really. Food prices are similar in figure though different currency

Typical price for a nasi lemak with an extra fried egg and a small piece of fried chicken would set us back RM8 these days. The only consolation is that we could still find properties which are priced lower than a median price of RM817,000. This is why the grass is not greener on the other side and every side would have their own issues yeah. Happy thinking about what to do for property ownership yeah.

Please share with people you care. You can get daily updates too.

Sign up for daily investment news updates (FREE since Nov 2013 and FOREVER). 

Alternatively, Follow me on Telegram here.

Please LIKE kopiandproperty.com FB page to get daily updates about the property market beyond kopiandproperty.com articles.