Luxury Real Estate Market Update……
This month, Christie’s International Real Estate released its annual luxury real estate market report, Luxury Defined: An Insight Into The Luxury Residential Property. Once again, two South Florida markets have made the top 10: Miami, defined as a Global Economic Hub and Jupiter Island for its reputation in the regional second-home market.
Worldwide, the average starting price of a luxury home is $2.1 million. According to the report, cash is not as prevalent as it was a few years ago, particularly in markets such as Miami, where cash-in-hand foreign buyers have waned. New Treasury reporting requirements for overseas buyers that purchase million-dollar-plus properties with cash have become a disincentive for some buyers, as well as overheated house prices have caused cash transactions to drop from 70 percent in 2013 to below 60 percent today. Experts predict that pricing corrections in the market will likely bring buyers — both cash and traditionally financed ones — back into the fold. The report quoted 60% percent of agents stating that the election outcome had little to no impact on their luxury sales to date, although in the South Florida market, nearly half of the HNWIs were sidelining cash until the election was over, and they are now seeing that cash being injected back into the luxury real estate market.
Miami moved down the report’s rankings, from tenth place last year to seventh place in 2017. Price reductions are becoming more commonplace, an influx of new developments, a steep increase in inventory supply, and a decline in luxury sales activity have impacted the market. New construction of luxury condos coupled with a growing resale inventory added a large number of units to the market. When inventory is up and more new construction products are added to the luxury market, it becomes more challenging to sell some of the older product that needs updating or improvements.
In November, the Urban Land Institute held its Miami Condo Symposium for discussions about the current state of the South Florida condo market. Panelists included Jorge Perez, chairman and CEO of the Related Group; Inigo Ardid, co-president of Key International; Ziel Feldman, chairman and founder of HFZ Capital Group; Moishe Mana, president of the Mana Group; and Eliot Spitzer, principal of Spitzer Enterprises. Perez was quoted as saying that there would be an international demand slowdown for Miami condos, but there is a lot of product to choose from. His company sees having less emphasis in the condo market and thinks the rental market will be stronger in next few years.
The report quotes a four percent drop in international buyers exacerbating issues caused by seller overpricing in the luxury property market. Agents spend a lot of time educating sellers on market conditions, especially when defining the line of demarcation – a seller’s market vs. a buyer’s market.
Some sellers just got tired of having their home on the market, so they drastically cut their list price to get a contract, which in turn, would set a lower benchmark for other comparable listings, creating a new demarcation in the marketplace.
However, well-priced Miami properties are still selling based on existing demand, which remains “significant though diminished”. Almost 40 percent of all million-dollar-plus sales during 2016 from original asking prices, which leads experts to predict that a great driver of residential real estate sales in 2017 will be appropriate pricing.
Elsewhere in South Florida, two Palm Beach properties made the Top 10 Residential Sales Worldwide, both single-family residences one selling for $85,000,000 and the other slightly cheaper at $77,060,000. There is only one Florida property, in Palm Beach, that made the current US$100M+ listings worldwide, a single-family residence for $137,000,000.
The report analyzes trends that are shaping the luxury real estate market, factoring in the effects of fluctuations in the global economy, while providing insights into buying behaviors, demographics, and preferences over the past year. After measuring key metrics, including record market sales price, prices per square foot, and percentage of non-local and international buyers, cities were ranked.
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