In these times of low unemployment, it’s hard to find good (any) help. For the wealthy, it’s also hard to find the right manse with an equally tight luxury real estate market. Recently, Christies published their sixth annual look at the global luxury real estate market. For those buyers, sellers, and real estate professionals, it’s an interesting view into the high-dollar niche world of luxury real estate (with surprisingly few eye-rollingly “woe is me” moments).
Let’s hit a few high points.
Christie’s defines a luxury home as one costing 3.4 times the cost of an average home in a given area. They further note that on average, the highest-priced home in a given area is 39 times the cost of the average home.
How does Dallas fit?
In Dallas, as of March 2018, the average Dallas home cost $358,856. Luxury in Dallas should therefore be around $1.218 million, which seems about right. At 39 times, the most expensive home in Dallas would be $14 million. There are currently 6 homes asking more than that … five of which Christie’s would deem dinosaur listings (on the market since dinosaurs roamed the Earth). So again, pretty accurate.
Being far from a luxury buyer, one of their findings raised an eyebrow. What partly drove an 11 percent year-over-year increase in $1 million-plus sales was a short supply of of high-end property. Broken down, sales in primary-residence areas were up 10 percent while second home markets swung from a 7 percent decrease in 2016 to a 19 percent increase in 2017.
Unsurprisingly, scarcity drove down the number of days on the market. In 2016 it took 305 days on average to sell a $1 million-plus home in a resort destination, compared to 259 days in 2017. In homestead locations the drop was from 160 to 146 days year-over-year (or a 10 percent drop).
In Dallas, you may recall the flurry of sales over $1 million at the end of 2017, where year-over-year, November and December sales were up 13 and 26 percent respectively. This added to a full-year growth of 31 percent. Selling prices were up a slim 2.8 and 1.1 percent in the last two months of 2017. (Note: Christie’s expects the results of the U.S. federal tax cuts for the wealthy will be visible in next year’s report.)
Christie’s also points to a realization by sellers that their homes were overpriced. Price reductions in the $1 million club helped get the market moving. Being overpriced in 2016 and 2017 is something I also noted last year in the normal housing market. These overpriced dinosaur listings, I called out for having the ”for sale” sign out front so long you could see it in Google Maps.
Near and dear to my heart was the finding that luxe multi-family dwellings (typically high-rise condos) are now almost required to have been designed by a starchitect (calling out a New York project by Zaha Hadid). Equally interesting was that as buyer profiles shift from old money to new Asian money, the cache of provenance (old houses with rich histories) are beginning to take a backseat to new build projects (hence the starchitect requirement). Asian cultures, particularly China, have been in the throes of bulldozing and reinventing their urban landscapes at home. When they buy internationally, they’re often looking for the same modernity. Proving the point, in 2017, 18 of the 35 highest selling condos were new builds.
For further evidence no one cares about Gen X, Christie’s highlights the difference and similarities of Baby Boomer and Millennial luxury home buyers. FYI: The oldest Millennials are 37 (feeling old?). What should be unsurprising is that downsizing Boomers are crashing into Millennial buyers closer to urban cores. The only minor difference being that Millennials want to be on top of the action whereas Boomers want to be a block away. I think this is true in all price stratum. But outside the urban core, “forever home” Boomers appear to be hogging up the best real estate by not moving (or moving-on) quickly enough. This limits Millennial millionaires’ (mostly official and unofficial trust-fund babies) home choices.
Having a back seat view of the Hawaiian volcanic eruption, it was interesting to note that buyers are becoming resigned to natural disasters and damaging weather. The report notes the real estate agent mantra for the unfolding century may be, “Natural disasters are the new reality.” Insurance and quality construction are king. Outside the criminal slowness of Puerto Rican repairs from hurricane Irma, properties damaged in 2017 by any number of disasters continued to sell well, although it’s too soon to tell what long-term impacts there will be from Kilauea’s eruption.
Penthouses are giving houses a run for their millions. Christie’s noted 28 sales over $50 million in 2017, a pinch over half of them were penthouses or sub-penthouses. Of course urban living and its associated costs have a lot to do with the ratio, but penthouses offer bragging rights, security and privacy. Perhaps counterintuitively, the largest penthouse sales brought in the lowest cost per square foot. A 29,800-square-foot penthouse in Dubai brought in just $932 a foot ($28 million). Compare that with the Hong Kong penthouse generating $16,966 for each of its 4,242 square feet ($72 million). Of the top 10 priciest condo sales, eight were under 10,000 square feet.
Finally, I had to laugh at one finding/recommendation. “Little is being done by governments to address the supply constraint issue prevalent in many global markets.” While this is an actual problem for affordable housing, I can’t imagine government intervention is required to build more luxury real estate. This is especially true when some luxe cities are simply being used to launder money and park wealth away from the prying eyes of their governments. I was told days ago that the new luxury section of Honolulu (Kaka’ako) has an occupancy rate on any given day of 14 percent while the rest of the state is experiencing an actual housing crisis. Government needs to halt these piggy bank ghost towns, not encourage them.
All in all, an interesting read.
Remember: High-rises, HOAs and renovation are my beat. But I also appreciate modern and historical architecture balanced against the YIMBY movement. In 2016 and 2017, the National Association of Real Estate Editors recognized my writing with two Bronze (2016, 2017) and two Silver (2016, 2017) awards. Have a story to tell or a marriage proposal to make? Shoot me an email firstname.lastname@example.org. Be sure to look for me on Facebook and Twitter. You won’t find me, but you’re welcome to look.