1. What is Purchase Price Parity in Real Estate?

Purchase Price Parity (PPP) in real estate compares the relative value of properties across different countries by accounting for exchange rates. It helps determine whether housing in one country is relatively expensive or cheap compared to another.

2. How Does the Calculator Work?

The calculator uses the PPP formula:

Where:

• Local House Price — Price of property in local currency
• US House Price — Price of comparable property in USD
• Exchange Rate — Local currency per 1 USD

Interpretation:

• PPP = 1: Properties are equally priced after exchange rate adjustment
• PPP > 1: Local property is more expensive than US counterpart
• PPP < 1: Local property is cheaper than US counterpart

3. Importance of PPP Calculation

Details: PPP helps international investors compare real estate values across markets, identify over/undervalued markets, and make informed investment decisions.

4. Using the Calculator

Tips:

• Use comparable properties (similar size, location, quality)
• Use current exchange rates
• For accuracy, use median prices for the area rather than individual listings

5. Frequently Asked Questions (FAQ)

Q1: Why use the US as the comparison benchmark?
A: The US dollar is the world's reserve currency and the US has transparent real estate markets, making it a common benchmark for international comparisons.

Q2: What are limitations of PPP in real estate?
A: PPP doesn't account for differences in property taxes, maintenance costs, rental yields, or local market conditions that affect real returns.

Q3: How often should PPP be calculated?
A: For investment analysis, calculate PPP regularly as exchange rates and local prices fluctuate. Quarterly updates are recommended.

Q4: Can PPP predict future price movements?
A: While PPP can identify valuation disparities, it doesn't guarantee price convergence as markets can remain "mispriced" for extended periods.

Q5: Should PPP be the only metric for international real estate investment?
A: No. Consider other factors like economic growth, demographics, rental yields, political stability, and legal protections for foreign investors.