After several years of rapid growth, the market for luxury real estate across the globe appears to be cooling off.
Sales of homes priced at $1 million and higher increased just 1 percent last year, after enjoying increases of 8 percent in 2015 and 16 percent in 2014, according to a new report from Christie’s International Real Estate.
Prices for luxury properties inched up 2 percent worldwide, but fell 3 percent in the United States. And it’s taking longer for sellers to move properties. Luxury properties sat on the market for an average of more than 7 months last year, a 13 percent increase from 2015.
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Sales for 2016 and the first part of 2017 are starting to show “a shift toward more of a buyer’s market,” Christie’s International Real Estate CEO Dan Conn said in a statement. Homes priced between $5 million and $10 million sold for an average of 90 percent of list price last year, down from 96 percent in 2015.
The Christie’s report says that sentiment is the most important factor in the movement of luxury home prices. Unsettling political developments, from Brexit and the election of Donald Trump to restrictions on Chinese capital flows, have generated uncertainty among high-end buyers and the effects are being felt in the real estate market.
Still, there are many markets where luxury sales are still strong, even if overall demand is starting to wane. The report ranked these American cities among the top 10 performing luxury markets in the world:
New York City. The Big Apple was the third-best city for luxury real estate, after Hong Kong and London, despite a 3 percent decline in sales from 2015 to 2016. At the very high end – homes priced more than $10 million – sales fell 8 percent. Its largest sale of the year was an $88 million penthouse on Park Avenue.
Los Angeles. Ranked the fourth-best city worldwide for luxury real estate, Los Angeles saw two homes sell for more than $100 million last year, the first time the city has broken that barrier. Now there’s a 56,500-square-foot Los Angeles home on the market for $200 million. The report calls that home a “relative bargain,” given its square-foot price of $3,500, well below the $8,500 average for other listings over $100 million.
San Francisco. In addition to taking the seventh spot on the list of best cities for luxury real estate, San Francisco was ranked as the third “hottest” luxury property market in the world, and the hottest in the United States. The hottest list reflects the growth in demand in each market. The gains in San Francisco reflect an influx of wealthy Chinese buyers as well as affluent Millennials.
Miami. Miami ranked 10th on the list of the best worldwide markets for luxury, falling three places from last year amid a decline in sales as new development increases supply and puts pressure on prices. Nearly 40 percent of luxury homes that sold in Miami last year went for significantly less than their original asking price. The city has also felt the impact of new Treasury reporting requirement for all-cash purchases from overseas buyers; all-cash sales there have fallen from 70 percent in 2013 to less than 60 percent.
