Trophy Homes Experience Market Fall In New York

There is a new trend in the once-frenzied real estate market for ultra-luxury homes. The end has come to ever-increasing price tags despite the skyscraping towers, luxury finishes and helicopter views. There is now often a huge difference between the price these trophy apartments are fetching and their initial asking price. The market has been flooded by a four- year construction boom targeted at buyers able to spend more than ten million dollars for a home. This is happening in the face of unstable global financial markets resulting in the pulling back of the rich investors, while the U.S. government is making an initiative to investigate cash-dominated transactions.

Many people have pointed to volatility in the financial markets as the reason for the pull-back in spending by the ultra-wealthy. While it may in part be true, other global factors are worth considering. Some of these include: the restriction by China on its capital outflow, Brexit, the impact of the reduction of oil prices, and increased tax rates in many countries. The effect of these combined factors is a dwindling volume of real estate sales, especially at highest levels. This has resulted in the delay of some projects, while other developers have resorted to drastic price reductions.

In one example, the initial asking price of a penthouse was 60 million dollars, but this was eventually sold for 42 million dollars after over 3 years on the market – a 29% reduction from the original price. In another example, a triplex penthouse which had been on the market for over a year at a price of 45 million dollars was eventually broken into two separate units. These two units are now being listed for 11.5 million and 28.5 million dollars respectively, giving a total value less than 40 million dollars. Similarly, the tallest of the new residential towers, located at 432 Park Avenue, once consisted of full-floor apartments priced up to 85 million dollars. These have been divided into two equal halves and each is now priced at about 40 million dollars. Meanwhile, there has been a postponement of any major marketing effort of a planned skyscraper at 111 W. 57th Street.

This high-end market meltdown is not limited to New York City. There has been a drop in property values in London, Singapore, Paris, Dubai and Moscow. All of these cities had been regarded in the past as stores of wealth for investors. In Manhattan however, in addition to the general trends affecting all of these global real estate markets, observers have identified some factors that are particular to the Midtown area. These include: oversupply, peak pricing and a lack of distinction between one glassy high-end unit and the next.

Excess supply can be a problem in any market. To the developers who built these ultra-luxury residences, it certainly looked like a good investment at the time. However, the situation has changed, and now even waiting for next year can be a risky proposition as no one can predict how the real estate market will be then.

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