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# Simon Salloom: Why Santa Monica real estate prices are a global bargain
- URL: https://www.smdp.com/simon-salloom-send-comments-to-editor-smdp-com-lets-look-global-think-local-for-a-minute/
- Published: 2007-10-03T15:00:00.000Z
- Updated: 2026-10-24T03:08:59.000Z
- Author: Guest Author
- Tags: Opinion, Brentwood, #archive-import

LET’S TAKE A GLOBAL PERSPECTIVE ON this whole real estate “bubble” thing and zoom in on the Santa Monica and Brentwood neighborhoods.

A couple times a month a client of mine, from either another U.S. city or another country will exclaim, “Wow, I can’t believe how affordable it is here!” Almost every week, I will hear a different client say, “My brother (or sister or parents) have a 3,000-square-foot home in North Carolina (or Idaho, or Texas etc.) on a half acre of land for $300,000.” I then tell them that if that same property was here it would be worth around $6 million, mainly for the lot value. For a second they are a bit bummed out and then they go ahead and buy a 1,100-square-foot two bedroom condominium for $700,000\. Location is what we sell when we sell real estate, this is what real estate is by it’s very essence.

Real estate values from Seoul, South Korea, San Francisco, New York City (Manhattan) all the way to London, England make the price of housing in Los Angeles look like a bargain. From 2004-2005 the English real estate market looked like it was slowing down for good. Since 2006 the housing market in London, is currently experiencing a second upward swing, achieving dizzying new heights of remarkable house prices.

Researchers David Miles and Vladimir Pillonca of Morgan Stanley did a study of housing markets in Europe and America. What they wanted to do was to take into account the superficial factors such as speculation based on optimism about future property values or media based frenzy — which lead to non-durable increases (or decreases) in value. They then compare the appreciation to durable factors such as rising real incomes, population growth and declining interest rates. The percentage of value that increased due to non-durable factors subtracted by the percentage of durable factors, will effectively give one a good idea of where a country’s real estate market may be headed. What many people may be surprised to find is that while in Belgium, Denmark, Britain, Greece, Spain and Sweden prices have risen disproportionately compared to the durable factors, America’s rise has been mostly due to durable factors. There are parts of the United States where values are not as durable or downright vulnerable, but overall it’s been a pretty even-keeled ascent.

Now, I’m just a guy without an MBA and without reams of data. What I do is sell real estate for a living, and I have been doing so for the past seven years specifically in the Santa Monica and Brentwood area. I have unfortunately lost some first-time home buyers due to the new mortgage market. I have lost some buyers to the idea that prices will be coming down hard sometime during the next six months — I have been losing the same amount of people to this sort of thinking my entire career, so it’s nothing new. The sad thing is that for most of them, sooner or later, they get priced out of the market for good. All of these people end up renting instead of buying. If you don’t own, you have to rent. With more people renting we have seen increases in rental values in the better parts of the city, far out-pacing the increases in home values.

At the same time, I have the same amount of real, genuine home-buyers as I have always had. They are more pensive than ever and there is nothing wrong with that. They hear a lot of reasons to be fearful but they want to live here. They don’t want to rent. The prices of rentals, after the tax advantages of owning are pretty much neck and neck with condominium and town-house properties.

In the more desirable Westside neighborhoods, you’ll probably pay 15 to 20 percent more to own than to rent after taxes. With a modest increase in values and a five year hold, a homeowner will effectively pay less to own than to rent. This would be what the two guys at Morgan Stanley would call a durable factor.

While the ratio of renting versus owning doesn’t apply to the single family homes in North Santa Monica and Brentwood, there are 9 million people in L.A. and the majority of them would be thrilled to live in one of these neighborhoods. There is a strong demand from people of means who make their fortunes in this city, and they aren’t worried about the cost of renting compared to the cost of their $4 million home. In fact, sales of properties $3 million and higher have been one of the hottest segments of the market all year.

Perception brought on by the media and the ill informed can influence things in the short term, but the true influence on any market are the durable factors governed by the laws of supply and demand. Despite all of the people out there who are convinced they know, no one can tell you exactly what the future of our local real estate market will be. For our little beautiful part of the world it seems we have some friendly durable factors on our side, and that makes me happy.

SIMON SALLOOM is a local Realtor who specialize in Santa Monica and Brentwood Real Estate. www.WestsideSimon.com.

*Originally published in the Santa Monica Daily Press print edition on October 3, 2007.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/100307.pdf?ref=smdp.com)