Continuing this two-part series on Global Lux Markets in 2020, Mansion Global’s Beckie Strum also included San Francisco, Miami, Dubai and Hong Kong in her piece. Here’s what she found:
In another post this week, we write that San Francisco lux home prices hit the wall in 2019. Strum takes a similar view but more specific view of the City By the Bay’s slice of the ultra-lux market by quoting Patrick Carlisle, the San Francisco chief economist of Compass, “The weakest segment of the market is the ultra-lux market.”
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Carlisle defines this ultra-lux segment as being condominiums priced at +$3M. “We have this expanding inventory of gorgeous magnificent condos and there just aren’t enough buyers. There are some 10-20 listings for every buyer and that was unheard of two years ago.”
Outside of this ultra-lux segment, Carlisle sees stable price growth and that “…demand will remain…assuming there’s not a stock market crash and that the trade war doesn’t go into a new level.”
Miami’s lux market has had a rough go the last several years despite there being a flood of out-of-state buyers coming in to Florida. The problem? Competition from Florida’s secondary waterfront cities such as St. Petersburg, Jupiter Island and Palm Beach where prices are less expensive, according to the latest joint report by Douglass Elliman and Miller Samuel.
According to Madeleine Romanello of Compass Florida, “We’ve been so overpriced over the last two, three years in some many different segments, people are confused. Especially for out-of-town buyers, there ‘s a question of what is it really worth? Buyers only want to pull the trigger on homes that are priced correctly.”
There are, on the other hand, indications that lux home prices will turn around in 2020 and if not 2020, then in 2021 as buyers are finally absorbing the “…wave of new condo development that kept down prices in the city for years” Romanello continued.
Additionally, along with increased seller negotiability. Miami is attractive to financial services companies fleeing high-tax hubs such as NYC and Greenwich, CT.
In October 2020, Dubai kicks off Expo 2020. This world’s fair is expected to draw some 25M visitors and fuel housing demand in the second half of 2020 and 2021.
For buyers, Expo 2020 is coming at the right time…lux real estate prices have been down 25%-30% since 2014 since the oil crisis and those prices are expected to continue falling as the city’s new construction glut drives them down. Stasis or price growth is expected in 2021.
Dubai has passed a suite of reforms to encourage lux residential spending…long term visas are being offered to certain types of expatriates (80% of the city’s population), accommodations are being granted to wealthy retirees, and the business environment is decidedly more friendly.
According to Haider Tuaima, head of real estate research at Dubai-based Valustrat, “Expo 2020 will definitely affect the psychology in the market and create more trust. We do not expect to see a sudden spike or anything crazy…it will be gradual and very slow – a more common sense kind of market.”
Prices of lux real estate dropped -25% in 2019 due to political unrest vis a vis China. This was the largest decrease in lux prices since the market dropped -29% in 2006. Analysts from Ricacorp Properties are predicting that “average” prices in Hong Kong will drop -15% and that lux prices will drop -20% in 2020 again due to unrest.
Despite all the upheaval in Hong Kong, total new home purchases in 2019 reached a 15-year high of 20,688 transactions compared to the high of 26,996 transactions in 2004, according to the Centaline Property Agency. The managing director of Centaline, Louis Chan Wing-lat, predicts. “developers will continue releasing more mass-market homes (not lux homes) to meet growing demand in Hong Kong during 2020.”