European recession may spur more Las Vegas real estate investment

The risk of deeper recession in Europe could encourage more Europeans to invest in U.S. real estate markets such as Las Vegas, an economist for Trulia.com said Thursday.

Las Vegas ranks No. 8 among cities in the United States for international home buyers, Trulia.com reported.

“If the euro does break apart or if there are more serious concerns that the government can’t pay its debt, that would lead to a deeper recession in Europe,” said Jed Kolko, chief economist for the Discovery Bay, Calif.-based online listing service. “The United States in general looks like a safer investment bet than Europe.”

Europeans will spend less on nearly everything, including real estate, Kolko said. But for those Europeans who are left in a position to invest, U.S. real estate assets could turn out to be safer than European stocks, bonds or property, he said.

Las Vegas, in particular, has two things going for it, the economist said.

First is global brand recognition, much like New York, Los Angeles, San Francisco and Miami.

The second part is affordability. Prices have fallen more than 60 percent from their peak. The median condo price was $58,550 in December, and the median single-family home price was $120,000, according to the Greater Las Vegas Association of Realtors.

“There are great deals in Las Vegas. San Francisco is also a global destination, but there aren’t great real estate deals like you have in Las Vegas. So it’s a combination of global destination and affordability,” Kolko said.

Miami and San Francisco are already large cosmopolitan cities with an international presence, he said. San Francisco, because of its scale and density, feels more European than Los Angeles. It’s easier to visit because people can take public transportation and walk around the city.

“Visiting L.A. is a different experience,” Kolko said.

Realtor Linda Rheinberger said she sees a lot more Canadians than Europeans looking to buy in Las Vegas, but wouldn’t be surprised about the increase in interest from Europeans.

It won’t be common people trying buy a piece of the American dream, Kolio said. Instead, it’s men and women of means looking for a safer place to put their money.

The three most expensive homes sold in the United States last year were bought by European billionaires and their heiress daughters.

Russian technology billionaire Yuri Milner paid $100 million for a mansion in the hills of Los Altos, Calif.; Ekaterina Rybolovleva, 22-year-old daughter of Russian billionaire Dmitriy Rybolovlev, bought a Central Park penthouse for $88 million; and Petra Ecclestone, 22-year-old daughter of British billionaire Bernie Ecclestone, purchased Spelling Manor for $85 million.

The last time he looked at international house hunting, Kolko found that most of the interest was coming from Canadians and that Florida was their favorite location.

This time around, he decided to shine a spotlight on Europe to answer the billion-dollar question: Will euros keep on flowing into the U.S. housing market or has that cash flow been capped?

Kolko compared house-hunting activity on Trulia.com that was coming from members of the European Union at the beginning of 2011 with what was happening at the end of the year. He zeroed in on the top 10 Eurozone countries — those that use the euro — that are doing most of the house hunting and then ranked them based on who had the biggest spike in interest.

Greece, commonly referred to as “patient zero” in the region’s debt crisis, showed a 17.8 percent increase in interest, followed by Italy (7.2 percent) and Spain (3.1 percent).

“While there are probably a multitude of other contributing factors, this simple observation suggests that many of these Greek homebuyers aren’t just looking for a home away from home. Instead, they’re looking to take their money and fly the coop,” Kolko said.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.