It’s essential for real estate agents to understand the current marketplace so they can get the best deal for their clients. And after years of watching the market favor sellers, many agents say they’ve seen a recent shift that has affected luxury property sales across the globe: We’ve entered a buyer’s market.
Jed Garfield, president of Leslie J. Garfield & Co., a New York-based brokerage that focuses on townhouses, said he saw signs of this trend in late 2015, when properties that were listed at a fair market price didn’t sell. But recently, the impact has been dramatic. For example, a townhouse on East 70th Street between Park and Lexington avenues that was bought for $31 million in 2013, re-listed for $32.5 million a year and a half ago—and then dropped down to $22 million three months ago.
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“The market is not what it was,” Mr. Garfield said. There’s an expectation that real estate prices will rise 3% to 5% each year, he added, but buyers won’t stand for that anymore. “You’d be very hard-pressed to find anybody who would pay more than 2015 prices today,” he added.
In Brooklyn, Compass agent Jay Heiselmann said he’s seen this shift play out as buyers looking for a $3 million-to-$5 million multifamily home have become pickier and more interested in negotiating than in years past. “People used to go and see everything that was on the market,” he said, but that’s no longer the case.
Dolly Lenz, of Manhattan-based Dolly Lenz Real Estate, said she has seen this shift affect the way agents are treated. As recently as a year ago, new agents who tried to get clients an appointment to see a top-tier new development in Midtown would be turned away, Ms. Lenz said. But now, not only is everyone getting appointments, they’re also being enticed to bring clients in with promises of extra commissions, “Hamilton” tickets, trips or cars if they make the sale.
“That is a sure sign of a very big shift to a buyer’s market,” she said.
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In these cases, interested buyers should negotiate hard, according to Ms. Lenz. And that advice holds not just for luxury real estate in the New York market, but also for those also in other U.S. cities like Miami and San Francisco, where there’s an excess of high-end, new and often similar inventory.
When it comes to the global market, Dubai has definitely converted to a buyer’s market, despite having “gorgeous architecture and beautiful properties,” because developers built too much too quickly, according to Ms. Lenz.
In the U.K. and Europe, the situation also largely benefits buyers, though the landscape is a bit more complicated. While buyers—specifically dollar-based buyers—automatically get a post-Brexit currency advantage in prime London, many still expect an additional 8% to 12% discount, said Gary Hersham, principal at London-based Beauchamp Estates. In this case, many sellers are opting to wait rather than make a deal.
“They think the pound is going to strengthen,” Mr. Hersham said. “They’re waiting for their values.”
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Amid this shift, “there are still pockets everywhere that are holding firm,” Ms. Lenz said.
Manhattan’s West Village is an example—a mini-market where inventory is scarce and there aren’t many new developments or conversion projects, according to Ms. Lenz. This has kept competition stiff and prices high.
Prime Beverly Hills has also been immune to big price cuts, Ms. Lenz added, as have cities like Melbourne and Sydney in Australia, where Chinese purchasers have been known to buy up an entire building in a day.
“It all comes down to this being a supply and demand story,” Ms. Lenz said. “If you have a prime property in a great location—something that’s irreplaceable or a trophy property—it is still a very strong market.”
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Here’s a look at other news from around the world compiled by Mansion Global:
Is Singapore’s decline in home prices and sales finally nearing an end?
Prices for houses in Singapore, and the declining number of sales, may finally be reaching bottom after 11 quarters of continuous decline, the Straits-Times reported. Private home prices have fallen 9.4% from their peak in the third quarter of 2013, while low mortgage rates have pushed vacancies up, said Savills Singapore research head Alan Cheong. But some apartment prices are starting to inch up, and bargains are beginning to attract high-end buyers back into the market. (Singapore Straits Times)
Previously:Singapore’s Shaky Luxury Outlook
Macau real estate bust may be over as gambling recovers
A revival of the casino business in Asia's worst-performing real estate market, the Chinese gambling mecca of Macau, may help housing prices rise after a two-year slump sent them down by a third, Singapore’s Business Times reported. One developer sold almost 90% of the units it offered on the first day in early July, with many of the buyers being local. Gambling accounts for half of Macau’s gross domestic product, but a Chinese anti-corruption push in 2014 drove big spenders away. (Business Times)
Vancouver tax on foreign real estate buyers plan to stem housing price spike is raising Toronto prices
Home prices and sales in Toronto are shooting up after the government of British Columbia government said it will seek work to stem a 30% jump in Vancouver home prices this year with a 15% tax on real estate purchases by foreigners. “The market is crazy–and especially this pocket,” said Toronto broker Lena Preje. “Four hours and it’s gone.,” she said of nearly every house she lists. Today many of the buyers are from China and Iran. (Globe and Mail)
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Brexit will see midterm rise in U.K. home prices
Home prices will rise more slowly in the immediate aftermath of Britain’s vote to leave the European Union, but pick up as exit negotiations with the EU progress and the market gets clarity on the future of the British economy. The Centre for Economics and Business Research predicts home prices will rise 5.7% by the end of 2016 and 2.2% in 2017, following annualized growth of 8% earlier this year. (City A.M.)
Job decline, Brexit, currency moves will push Dubai apartment prices lower
Dubai apartment prices will continue to fall for 12 to 18 months, according to research firm Phidar Advisory. Apartment prices fell 3.7% in the second quarter, while house prices fell 1.1% over the previous quarter. A rising dollar has raised the cost of Dubai property for buyers from key markets such as India, Pakistan and the United Kingdom, and the British pound has fallen 11% to 12% after Britain voted to leave the European Union. “The conclusion that we’ve come to is demand is weakening, and that ties up with anecdotal evidence. You see people leaving, you talk to recruiters who will be honest, and they say there is no job growth," said Phidar Managing Director Jesse Downs. (The National)
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Bill Gates draws buyers to quiet Mexican beach resort
Bill Gates has unleashed a high-end building boom on Mexico’s Riviera Nayarit, north of Puerto Vallarta on the Pacific Ocean. Two years ago, an investment fund owned by Gates paid a reported $200 million for 48 acres of undeveloped beachfront land and the Four Seasons hotel site in Punta Mita. Building lots in the area now start at $80,000, while two- bedroom apartments start at about $250,000, and hillside villas are priced from about $800,000. “We needed high-end clients and now they’re coming,” said Aaron Fisher, sales director at the Punta Sayulita development. (New York Times)
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San Francisco proposes luxury home tax to fund street-tree care
City officials said they’ll likely use money from a proposed $44 million luxury real estate tax on November’s ballot to fund a $19 million annual program to care for the city’s street trees. In 2011, the cash-strapped city told property owners they’d have to care for the trees in front of their homes and repair sidewalks cracked by growing roots. But now, flush with cash, the city is taking back responsibility for the trees. (Merced SunStar)
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