Luxury real estate markets: a comparison
Recently Bloomberg Businessweek published an article titled “Signs of a Slowdown in the Luxury Condos”. The piece asserts that a strengthening dollar is chipping away at the buying power of international buyers shopping the real estate markets in New York City, Miami and Los Angeles. With currencies including the Euro and ruble plunging against the dollar, this may be a trend to watch.
Here in San Francisco, however, we’ve never seen the caliber of foreign buyers seen in the aforementioned three cities. We’re not big in terms of attracting Russian oligarchs and the ultra-wealthy from Latin America. Rather, our affluent buyers are mostly local and most of them are still actively working for a living.
That said, something we’re seeing here as well as in New York, Miami and Los Angeles is the fact that new-home construction is probably more concentrated on the highest-priced segment than at any time in the past. The United States luxury home market has outperformed the general market ever since the recovery began in earnest in 2012, and this is particularly true here in San Francisco, where the number of luxury sales has soared more than 370 percent since 2009. This led Businessweek to astutely deduce that this “has enticed developers to build more high-priced homes.”
But how many luxury condos can any market absorb as increasingly large numbers continue to be planned, built and put up for sale? These days, the opening of an ultra-luxury condo development such as Lumina caused a feeding frenzy of demand for units that probably won’t be delivered until the end of this year. However, as more Lumina-grade developments come onto the market in ensuing years, it will remain to be seen whether we’ll hit a saturation point.
Statistics to follow in my next blog post.
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