With post-Brexit uncertainty in the U.K., an ongoing international migrant crisis, terrorism threats globally, and a potentially destabilizing presidential election looming in the United States, it seems impossible to predict where to find a safe investment, let alone where investors can find luxury values today.
While there isn’t a simple answer, there are some guiding principles defined by a buyer’s motivation.
For real estate buyers that want to grow their capital or achieve an income, Yolande Barnes, the director of world research at Savills, recommends purchasing a secondary property in a “second-tier city with a story.” These are smaller, but still vibrant cities that are doing well in the digital age, or places that are currently having a creative renaissance.
These cities, like Oakland or Philadelphia in the United States, or Barcelona or Amsterdam in Europe, haven’t seen the same levels of capital growth as the prime gateway cities like New York or London, but have good prospects, according to Barnes. This means that buyers can pick them up at a lower price point today and have a better chance to make a significant profit on a future sale. In the short term, rent offers a quality income stream. Overall, it’s a strategy that represents a “real return to the fundamentals of property investment,” Ms. Barnes says.
More:Brexit's Gloomy Implications for the Spanish Property Market
Mixed-use properties that offer a residential-commercial hybrid can also fit the needs of this type of investor, as can properties that Compass associate broker Maria Manuche refers to as “affordable luxury.” These are listed in the $1,300- to $1,400-per-square-foot range instead of the $6,000 per foot ultra-luxury level, Ms. Manuche says, and represent a “very active market right now.”
People buying luxury property for their personal use are likely more concerned with whether or not it’s in a specific resort or destination city, not with its relative value. “The smart buy isn’t always the buy they want to make,” Ms. Barnes says.
For buyers who just want a safe way -- and place -- to protect their money for the long haul, Barnes says that she sees the value in real estate, especially when the stock and bond markets are so volatile. Ms. Manuche says she’s recently seen a “reserved but strong interest in New York” from her clients in China and Japan, and she’s not the only one. Other brokers have said the same about New York, referring to it as the current “safe haven” of choice for luxury real estate investors from around the world.
But Barnes notes that a “safe haven” doesn’t have to mean an urban center, adding that buyers should consider how much they are competing with others because a place is fashionable versus considering what will actually be a safe place to store their wealth.
“Upstate New York is every bit as safe and secure as New York City,” she says.
More:What to Know About Chinese Buyers in the U.S.
Here’s a look at other news from around the world compiled by Mansion Global:
Builders running out of tenants for high-end U.S. rentals
Construction concentrated in fast-growing urban markets has left cities from New York to Denver and San Francisco with a surplus of high-end units. Rent growth has already tapered off in some areas, and lenders are getting more selective about the projects they fund. “You can’t build forever, it doesn’t work that way,” said Ryan Severino, chief economist at research firm Reis Inc. “The apartment market is losing steam.” (Bloomberg)
San Francisco luxury market hit as tech buyers, foreign investors pull back
San Francisco’s overheated real estate market is finally slowing down, with overall inventory rising to levels not seen since 2012, SFGate reported, as tech workers and foreign investors take a step back. Prices have dropped slightly. The median sale price for a single-family home in the Marina was $2,785,000 in May 2016. One year ago, it was more than $3 million, and the median sale price in Pacific Heights fell nearly 28%. (San Francisco Chronicle)
One Direction's Styles sells Los Angeles home at a loss
Teen heartthrob Harry Styles is selling his renovated post-and-beam home in Beverly Crest for $3.175 million in an off-market deal, the Los Angeles Times reported, citing public property records. Mr. Styles bought the Alejandro Ortiz-designed compound on a third of an acre two years ago for $4 million. (Los Angeles Times)
More:Post-Brexit, Discounts But No Bargains For Prime Homebuyers
Los Angeles sees sales of super-luxury homes stall
The number of sales of $10 million or more in Los Angeles County has dipped in three of the last five quarters for which data is available, even as inventory has steadily grown, the Los Angeles Times reported. Brokers say the slowdown is more pronounced at higher prices. As of mid-June, nine homes in the county had sold this year for $20 million or more, compared with 18 during the same period last year, according to Loren Goldman a vice president with First American Title Co. Some 30 new hillside homes priced above $30 million are set to hit the market in the next year and a half. (Los Angeles Times)
Brexit may be good news for Canadian real estate
Brokers in Toronto and Vancouver are pitching Canadian cities as relatively safe real estate havens now that London, for years one of the world’s leading targets of foreign capital, suddenly looks a lot riskier. “Brexit’s good for us, not for them,” said Anita Springate-Renaud, owner of Engel & Völkers brokerage in Toronto, who said she expects calls from clients seeking to redirect their investments. “We are a safe bet.” (Bloomberg)
Brexit effect sends U.S. mortgage rates to near all-time low
While their peers in the U.K. face the threat of sinking property prices after the country’s vote to leave the European Union, bankers predict the referendum outcome will let American homeowners refinance. According to data published by Freddie Mac, the 30-year fixed-rate mortgage is at 3.48%, only 17 basis points shy of an all-time low. (Financial Times)
More:Brooklynites Searching for Better Deals Drive Luxury Home Price Higher in Neighboring Queens
Hong Kong real estate sales fall nearly 40% in past six months
Hong Kong’s overall property sales plunged to their lowest level since 1991 in the first half of the year, according to the latest figures from Midland Realty, as the dim economic outlook and increased home supply continued to cast a shadow over the market. The latest figures show total sales values fell 39.2% in the six months to HK$189.5 billion. (South China Morning Post)
Abu Dhabi’s Reem Island rents could fall by as much as 10 percent
Residential rents for existing tenants could drop by year end, as Gulf states feel the effect of job cuts across the oil and gas and construction industries, and the fall in global oil prices could finally persuade landlords on Reem to lower rents for existing tenants, according to international brokers JLL. Reem and other newer areas of Abu Dhabi have about 245,000 residential units with 4,000 more expected to enter the market this year, JLL said. (The National)
Sydney home sales headed for a slump...
Sydney's housing market has sunk into a lull that could last at least two years, the Daily Telegraph reported, noting that only one of the city’s 700-odd suburbs showed prices likely to rise, with most areas recording a drop in sales activity compared to 18 months ago. The exception is Drummoyne, but the suburb is not expected to record strong growth, according to Hotspotting’s Price Predictor Index. (Daily Telegraph)
...or not, with prices yet to reach their peak
Sydney’s property prices have not yet "run out of puff," with houses and apartments yet to reach their peak, according to a report from national real estate valuation firm Herron Todd White. While Melbourne has now reached the top of its potential price growth, Sydney homeowners can expect further capital gains, the report found. (Domain.com.au)