On Manhattan’s "Billionaire’s Row", A Death Knell Just Tolled For Luxury Real Estate
By Tyler Durden
Some will say that it was visible from the 95th floor, so to speak, but even so the metamorphosis taking place in the Manhattan real estate market over the past year has been a stunning development.
Having followed the collapse in the New York luxury housing segment, most recently in “Desperate Sellers Resort To Dramatic Price Cuts In Manhattan’s Luxury Real Estate Market“, as a result of the sudden halt in inbound offshore hot money mostly of Middle Eastern, Latin American and Chinese origin due to the crackdown on anonymous LLCs, money laundering and just the general drop in offshore ultra high net worth over the past year, we thought that we were prepared for ongoing news of a sharp slowdown in NYC luxury retail sales.
That said, even we were surprised by the following NYT narrative of just how dramatic the slowdown in the most opulent segment of NYC housing has been.
In many ways it mirrors, or perhaps precedes, the inevitable bursting of the private tech bubble – both marked by wildly overvalued assets whose prices are not grounded in anything remotely close to reality, exorbitantly expensive only because a handful of the world’s uber-wealthiest flip them back and forth to each other, in what is both a game of hubris as well as hopes of finding ever dumber money.
A view of Central Park from an apartment on the 45th floor of 157 West 57th Street
This is how the NYT summarizes the tremendous rise and the upcoming fall of NYC luxury housing:
Even with every conceivable amenity, the eight- and nine-digit prices attached to trophy homes with helicopter views and high-end finishes never bore much relation to actual value. Rather, a class of superrich investors primarily drove the market, choosing high-priced real estate as their asset of choice, because it was less volatile than other investments and they could use shell companies to hide their identities.
But today a four-year construction boom aimed at buyers willing to spend $10 million or more has flooded the top of the market just as global market turmoil has caused wealthy investors to pull back and the federal government has moved to scrutinize some all-cash transactions.
Indeed, as author Michelle Higgins puts it, “New York City’s ultraluxury real estate frenzy — with its sky-piercing condominium towers and $100 million price tags — has finally come to an end.”
The reasons for the slowdown, as noted above, are numerous, but all point to one direction – the demand so prevalent in recent years is no longer there: It’s not just the volatility of financial markets that has big spenders sitting on their wallets. Other global trends that have put the lid on high-end spending include China’s tightened restrictions on capital outflows, uncertainty surrounding Britain’s decision to leave the European Union, lower oil prices curbing wealth in the Middle East, and tax increases and other measures that have driven up property transaction costs in some countries.
“The global misperception was that the demand …read more
Source: On Manhattan’s "Billionaire’s Row", A Death Knell Just Tolled For Luxury Real Estate
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