Whether they’re considering a Hyde Park penthouse, a South Beach condo or a Bel Air mansion, prime outdoor space likely tops the list of amenities that luxury buyers are looking for, experts say. But this wasn’t always the case.
"Ten to 15 years ago, outdoor space meant an eight-foot-wide terrace, and that was generous," said Jay Parker, the CEO of Douglas Elliman’s Florida brokerage. A balcony of that size can barely fit a small table and two chairs, he said, and if the owner got lucky, maybe a mini barbecue, too.
Now, he said, outdoor space in new condo projects is not only bigger, but also more usable, curated and specialized, with the same holding true for single-family homes.
"Developers are adding features like fully functional outdoor kitchens, infinity pools on terraces, and doors and floors chosen for how they seamlessly transition from indoor to outdoor space," Mr. Parker said.
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So, how do you put a value on this luxury outdoor space? That’s a nut that appraiser Jonathan Miller, the president and CEO of New York-based Miller Samuel, Inc., has tried to crack for over 30 years in the industry.
Ten years ago, he published a blog post on how to value space on Manhattan terraces, in which he posits that outdoor space is worth somewhere between 25 to 50 percent of the price per square foot value of indoor space. For the past six years, it has been one of the most popular items on his site, he said.
While Mr. Miller still thinks that a relationship does in fact exist between indoor and outdoor space, what that relationship is depends first on the quality of the overall property, and then on the utility and usability of the space and the specific amenities related to it.
"I can’t tell you that in Denver it’s 33 percent and that in Seattle it’s 42 percent," he said. "It’s more that in a given market, the value of the outdoor space has a proportional relationship to the indoor space, which can be quite different."
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Both that tiny terrace of 10 or 15 years ago, as well as the present day deck on a high floor, where it’s often too windy to leave a table or chair out without it blowing away, has little utility, experts say. That means that even if the high-floor terrace wraps around the building and is the same size as a basic but functional rectangular terrace, it’s worth less.
What buyers want when it comes to the utility of outdoor space is cohesive connection from indoor to outdoor living areas, ideally with floor-to-ceiling sliding glass doors that disappear when opened into an in-wall hiding spot, said Shaun Drummond, the sales director of London’s Harrods Estates. They also want beautiful outdoor furniture, made of materials and fabrics that are fully weather resistant, to add to the ease of inhabiting the space, he said.
While this sort of outdoor living space means tacking on a premium to the price, Mr. Drummond continued, the converse is also true.
The higher the price per square foot, the more people now expect these features," he said.
When it comes to usability, experts said that outdoor space is worth more — although none would put an exact figure on it — when it’s found in a climate where owners can take advantage of it year-round. But even in less temperate climates, features that extend the period of time that outdoor space is useful, like dining areas covered with permanent or retractable roofs and screened-in decks to keep out mosquitoes and other bugs, can also add value.
And then there are the luxury amenities, which experts note make homes more like resorts. These include full outdoor kitchens or party-friendly summer kitchens; infinity pools, whether they’re in a backyard or on a deck; fire pits; and additional areas to "program" as living space, said Susan Smith, an agent with Hilton & Hyland in Los Angeles.
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Other less tangible, although highly in-demand amenities that are best experienced from the outdoors and add serious value, include total privacy from a backyard or terrace, unobstructed views, and access to water, whether that’s a to a lake, a river or a beach, Mr. Drummond said.
While no one could — or would — put a specific value on outdoor space, Mr. Parker, for one, would like to see that happen in the near future, especially as outdoor space becomes fully livable and functional in places like Miami, he said. Once buildings like Eighty Seven Park, the Renzo Piano-designed luxury condo complex, with units boasting 2,000 square foot terraces — up to 70 percent of the interior space — are finished, he thinks it might become customary for developers to transparently charge ‘X’ for the interior space and ‘Y’ for the exterior space, resulting in a blended price per square foot of ‘Z,’" he said. "Ultimately, that would be very helpful."
Until that happens, David Martin, the President of Terra, the Miami-based development company behind Eighty Seven Park, is banking these yet-to-be-built condos holding their value better than units in other Miami luxury buildings because of their outdoor space.
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"Historically, balconies weren’t viewed by developers as a positive," he said. "But, when we look at existing buildings, the penthouse or lanai units — the only ones with big terraces — have performed better, with prices that remain more stable than the rest of the building," he said. The buyers, in this way, have spoken.
Here’s a look at other news from around the world compiled by Mansion Global:
Rent an Upper East Side Townhouse That Was Once Home to Marilyn Monroe
A classic New York townhouse is back on the rental market asking $26,500/month, a price that may well be worth it if you’re impressed by the building’s Hollywood pedigree. The home, formerly owned by famous photographer Milton Green, has at different points played host to the likes of Irving Berlin, Bette Davis, and Marilyn Monroe, the latter of whom referred to the house as her "sanctuary." The house maintains original details such as a marble staircase and vintage stained glass, and in its way, is a bargain: the asking price has been cut down from $35,000/month. (Curbed New York)
London Sales Have Slowed as Sellers Yank Listings From the Market
Rather than accept lower sales prices, an increasing number of London home sellers are opting to pull their listings from the market and instead offer them as rentals until the post-Brexit economy settles down. Home sales in the city so far this year are the lowest they’ve been since 2012, amid reports that property values could experience "substantial" declines if the Brexit vote triggers an economic slowdown in the U.K. "We have seen a lot of vendors opt to rent instead of sell because of all the turmoil caused by the vote," said the residential research director of Hamptons International. (Bloomberg)
More:London Mayor Sadiq Khan Launches First Probe into Foreign Home Ownership
Seattle is Seeing a Surge in LLC Buyers
Seattle’s hot real estate market is attracting a growing number of outside investors, with the number of single-family and attached houses purchased by LLCs more than tripling between 2000 and 2015. All told, there were 10,425 LLC purchases in the city last year (representing 2% of the total market), the highest rate seen since before the recession. Before the recession hit, "People were buying homes left and right and flipping them," said one local real estate attorney. "Obviously it dropped off dramatically during the Great Recession, but it’s back on again." (Seattle Times)
Vancouver Investors Expected To Shift Their Focus to Commercial Real Estate
In the wake of Vancouver’s new 15% tax on foreign property buyers, international investors are instead likely to up the ante on their commercial investments in the city, according to a report from brokerage Re/Max Holdings Inc. Commercial transactions have already been on the rise, totaling $7.14 billion in the first half of 2016, nearly double the number from the previous year. "As a result of the recent foreign-buyer tax on residential properties, buyers who are interested in investing in greater Vancouver may start to shift their focus to commercial properties," a Re/Max executive said in a statement. (Bloomberg)
China’s Property Market is Still Gangbusters In Spite of Fears of a Bubble
Chinese buyers are still in a "frenzy" to snap up properties, flying in the face of record-high prices and increasing fears of a real estate bubble. Per a recent survey by the People’s Bank of China, 53.7% of respondents found housing prices "high and hard to accept," with only 42.9% finding them "acceptable." Similarly, 23.1% of respondents predicted that prices would rise next quarter, with 11.9% predicting a drop. Still, the ratio of residents "prepared to buy a house within the next three months" increased 1.3% from the previous quarter. In order to calm the market down and prevent a bubble burst, officials in some cities are implementing measures such as larger down payment requirements and restrictions on non-resident buyers. (The Real Deal)
More:Vancouver and Five Other Global Cities Facing a Housing Bubble, UBS Finds
Dubai Rental and Sales Prices are Expected To Continue Their Recent Decline
A new report from global consultancy Deloitte predicts a continued drop in sales prices in Dubai, where overall residential prices declined by 3.8% between June 2015 and June 2016. The cooldown may spread to the rental market too, says the report, "if speculative investors who are unable to sell products for a satisfactory return instead decide to release units for rent." The dip in prices is attributed to a more "mature" market, as well as an increasing number of affordable options in emerging areas of the city. (Gulf News)
Rate of Loss for Australian Sellers Has Increased, But Isn’t Cause for Serious Concern
The latest Pain and Gain report from CoreLogic shows that the number of Australian sellers taking a loss has recently increased but not enough to indicate a worrying downward trend. Generally speaking, suburbs and coastal areas fared better than cities, where there are signs of excess supply. (Perth and Darwin showed the largest rate of losses in the last quarter, at 20.1% and 24.2% respectively.) "Unless there is a real trend [of the rate of loss] increasing, I wouldn’t read too much into it," said CoreLogic analyst Cameron Kusher.(news.com.au)
Chinese Investors Buy a Sydney Property for the Lucky Number of $88.88 million
Chinese firm Bridge Capital has acquired a large residential property in downtown Sydney for $88.88 million, a number that’s considered very lucky, as it sounds like the word "prosperity" in Chinese. "This is not the first time that Chinese buyers have chosen to offer a price that includes numbers that are considered lucky," explains the broker on the deal, who notes that the final sales price was close to what was offered by other buyers. "They just chose these numbers for luck and as it turned out their luck was with them," he explains. Along with Australian iPropsperity group, Bridge Capital bought 333 Kent Street in Sydney’s Central Business District, with plans to turn the property into a residential building and hotel. (BBC)