Mansion Global

Now More Than Ever, Luxury Properties Need Price Corrections to Sell

Also, a roundup of other news from around the world this week

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This newly constructed 2,540-square-foot condo at 150 Charles Street in Manhattan’s West Village is asking for $8.9 million.

DOUGLAS ELLIMAN REAL ESTATE
This newly constructed 2,540-square-foot condo at 150 Charles Street in Manhattan’s West Village is asking for $8.9 million.
DOUGLAS ELLIMAN REAL ESTATE

Price Correction. It’s a term luxury property seekers and sellers are hearing bandied about rather often — and it’s a concept that’s likely here to stay.

Catherine Marcus, a broker at Sotheby’s International Realty in Beverly Hills, said that she’s regularly seeing properties with “nothing unique about them” hit the market for $50 to $100 million and above in Los Angeles.

“It’s just fantasy land,” she said, with sellers often settling for about half the listing price in the end.

“It’s an ego thing,” Ms. Marcus said. “Everyone is thinking about breaking records.”

Donna Olshan, president and owner of Manhattan’s Olshan Realty Inc., is also seeing this phenomenon play out in New York. Whether this “fantasy pricing” is driven by agents looking to increase their profiles, sellers who think their property is more unique and valuable than it really is, or some combination of the two, the market always speaks, Olshan said.

“The properties don’t sell, they sit on the market, and ultimately, they become tainted with a label that they’re old, stale inventory,” she said.

Her firm’s weekly luxury real estate report showed a 2016 high of 35 Manhattan homes were sold last week, but only after many sellers agreed to hefty price cuts (more than 11% on average).

“Pricing is a real challenge when the market is choppy,” Ms. Olshan said, and right now, comparable sales aren’t a relevant benchmark when deciding on price. “The only thing that’s relevant is who’s in the pool at the same time in the lanes next to you,” she said.

For sellers, that means getting used to — and acting on — the idea that there’s just more global inventory and less overall demand compared to a few years ago, said Jay Parker, the CEO of Douglas Elliman’s Florida brokerage. Sellers can’t expect that a property they spent $10 million on three years is automatically worth $17 million today, he said.

A final dynamic driving overpricing in the luxury market is data pollution, Ms. Olshan said. Because second quarter reports will include sales for new construction that’s just closing now but went into contract in 2013 -- when prices in downtown Manhattan were particularly high -- they’ll be numerically accurate, but won’t reflect what’s really happening right now.

All of these factors combined lead to a final takeaway: If a property is going to move, Ms. Olshan said, “people need to get reasonable and get their price in line.”

Here’s a look at other news from around the world compiled by Bradley Keoun:

Private Wealth in Asia-Pacific Surpasses North America for First Time

Millionaires’ assets in the Asia-Pacific region rose 10% last year to $17.4 trillion, nudging past North America’s $16.6 trillion, Bloomberg News reported, citing Cap Gemini. China’s millionaire population increased by 16%, the fastest increase, although the U.S., Japan and Germany still have more total millionaires. By 2025, China’s millionaires are projected to have $42.1 trillion of wealth, compared with $25.7 trillion in North America. (Bloomberg)

Hong Kong Overtakes Angola’s Capital as Most Expensive City for Expats

Strength of the Hong Kong dollar has helped push the island to the top ranking on consultant Mercer’s list of the most expensive destinations for expats, AFP reported. Hong Kong eclipsed the Angolan capital of Luanda, which had held the top spot for three years. Zurich, Singapore and Tokyo rounded out the top five in the annual survey, which examined the cost of more than 200 items such as housing, food, transport and entertainment, in about 200 cities. (The Business Times/AFP)

Home Prices in Washington State Rising Fastest in U.S.

Washington’s home prices surged 10.6% in the year through April, the fastest in the nation, The Seattle Times reported, citing data from CoreLogic. The pace, almost double the national average, was attributed to an improving local economy, a low stock of available housing and Washington’s attractiveness to millennial, with its mix of urban and scenic outdoor activities. (Seattle Times)

San Francisco’s Housing Market Starts to Cool After Four Years

San Francisco’s median home price rose 2% in the 12 months through May to $1.38 million, after surging 23% in 2015, Bloomberg News reported. While demand remains strong in the area, job growth and venture-capital investment are both slowing, and the stock market is sluggish. The city has fallen off of brokerage Redfin’s list of the 20 hottest U.S. housing markets, with Denver, Seattle and Portland, Oregon, now taking the lead. (Bloomberg)

Super-Rich Eager for Luxury Real Estate Investments, Citigroup Says

Clients of Citigroup’s private bank with at least $100 million are snapping up luxury properties as safe-haven investments, Reuters reported. Many Chinese investors see North America as the most desirable place to invest, according to Ida Liu, Citi Private Bank’s New York market head. (Reuters)

Sales of Top-End Villas on Dubai's Palm Jumeirah Tumble 44% First-half of 2016 sales of villas priced over $2.7 million on Dubai’s artificial archipelago Palm Jumeirah fell by 44% from a year earlier as falling prices deterred sellers from listing their homes, The National reported, citing property broker Core. Sales prices for villas on the palm fell by 4%. David Godchaux, Core’s chief executive officer, said an overhang of potential sellers would prevent a strong recovery in prices in the near term. (The National)

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