Aren’t you glad you decided not to buy a $10 million plus condo in New York City or other high-end locales recently? The market is dropping and your money will go a lot farther now. From Michelle Higgins at The New York Times via davidstockmanscontracorner.com:
New York City’s ultraluxury real estate frenzy — with its sky-piercing condominium towers and $100 million price tags — has finally come to an end.
Even with every conceivable amenity, the eight- and nine-digit prices attached to trophy homes with helicopter views and high-end finishes never bore much relation to actual value. Rather, a class of superrich investors primarily drove the market, choosing high-priced real estate as their asset of choice, because it was less volatile than other investments and they could use shell companies to hide their identities.
But today a four-year construction boom aimed at buyers willing to spend $10 million or more has flooded the top of the market just as global market turmoil has caused wealthy investors to pull back and the federal government has moved to scrutinize some all-cash transactions.
It’s not just the volatility of financial markets that has big spenders sitting on their wallets. Other global trends that have put the lid on high-end spending include China’s tightened restrictions on capital outflows, uncertainty surrounding Britain’s decision to leave the European Union, lower oil prices curbing wealth in the Middle East, and tax increases and other measures that have driven up property transaction costs in some countries.
As the volume of sales at the uppermost level has dwindled, some sellers have made drastic price cuts and some projects have been delayed.
Developers of the skyscraper planned for 111 West 57th Street said they would postpone marketing materials and events for condominiums in the building, some priced as high as $57 million, until next year.
At 432 Park Avenue, the tallest residential tower in the Western Hemisphere, full-floor apartments originally listed for $78 million to $85 million have been split in two and priced at approximately $40 million each.
In and around West 57th Street, known as Billionaires’ Row, “it’s not just slow — it’s come to a complete halt,” said Dolly Lenz, a broker to the superrich. She attributed the lack of activity along the Midtown corridor to oversupply, little differentiation among glassy ultraluxury units and peak pricing. “That’s a death knell,” she said.
New York is not alone. After the global financial crisis hit in 2008, investors turned to high-end real estate around the world as a safe place to park their millions. But since the middle of 2014, prime property values have dropped in Paris, Singapore, London, Moscow and Dubai, said Yolande Barnes, director of world research at Savills, a global real estate firm. “These cities have acted as a store of wealth,” said Ms. Barnes, who sees the current decline in values as “an inevitable setback that you get after a long bull run.”
Though the market still has a long way to go before fire-sale pricing sets in, the declines may indicate that a ceiling has been reached. And even as sales over $10 million drop off in Manhattan, the bulk of the market remains robust, with competition particularly heated for homes priced for less than $3 million.
To continue reading: Sky High Condo Markets Go Stone Cold
