The last few years have been difficult for real estate. Largely, the perception is that luxury real estate properties did not suffer as much as the lower range ones. However, a new report by brokerage firm Stribling & Associates indicates that even luxury properties have had a tough time coping in a post-recession market. The 2010/2011 report concentrates on New York City’s Manhattan area and recognizes that properties in the $5 million and higher market are governed by a different set of factors than lower-priced properties. According to the analysis, luxury real estate sold at their peak in 2008. By 2009, prices had dropped to their nadirs. From 2010 onwards, a partial recovery has been noticed.
Part of the reason for the great big fall was the soaring prices of property earlier. Prior to the Lehmann Brothers fiasco, even $50 million seemed like chicken feed as far as the top trophy properties of Manhattan were concerned. Once the bubble burst, Manhattan real estate prices spiraled downward quickly. Not only that, the economic crisis went far in changing people’s attitudes to luxury.
Evidence of this attitudinal change was visible by 2009 when there was a significant decrease in property sales. In the $5 million plus category the decrease was 44 percent for condominiums, 40 percent for townhouses and about 50 percent for cooperatives. The figures were much worse for $20 million plus properties, where the decreases were 82 percent for condominiums, 77 percent for townhouses and 80 percent for cooperatives. At the higher end of the Manhattan real estate market, it was almost as if no sales were happening. Recovery began in 2010, though the higher range property sales rose from the latter half of 2010 onwards.
The lower end of the Manhattan real estate market reacted to the decline in sales by dropping prices by up to 30 percent. However, at the upper end, prices did not decline, which cut down on sales. You will remember that at the time, any kind of extravagance was looked down upon. The need for renovations also hampered sales. People were no longer willing to spend renovation money and wait until repairs were complete. Thus, while $20 million plus luxury real estate in perfect condition sold quickly, the ones that needed work did not.
2011 is witnessing a recovery, but there is a shortage of luxury real estate available for sale. Part of the reason could be that all the owners who needed to sell their properties have already done so. Meanwhile, others are not yet ready to put their properties on the market. Issues in Japan and the Middle East are not helping either.
However, as far as luxury real estate goes, New York is prime location. And plenty of foreign buyers are investing in Manhattan real estate. Although foreign buyers make up only about 15 percent of this market, they are offering a degree of security and encouraging further investment. Wealthy Americans are investing in property whose prices have dropped by between 30 and 50 percent. Though slow, the market is on the road to recovery.
Via: Passion Investor