Knight Frank reports that home prices are climbing in both mainstream and luxury markets in the U.S., with luxury properties being bought up by a greater number of international buyers than in the past. Miami and New York are both hotspots for international purchasers, with about a third of sales above $3 million in the latter market going to foreign buyers. Lack of supply and a slow construction market is helping to drive prices even higher. The tony Hamptons market, for example, just had its best quarter since 2006 and interest is not slowing for high-end homes. For more on this continue reading the following article from Property Wire.
Mainstream house prices in the US are now 9.3% higher than a year ago and new home sales are at their highest level for five years with lack of supply fueling growth and recovery.
The growth is being led by demand in the luxury property market sector with international buyers snapping up properties, according to a new analysis from international property firm Knight Frank.
A lack of supply as a result of tight credit conditions has been the main driver of luxury price growth so far this year, the analysis says. For example, the number of apartments for sale in Manhattan is currently at a 12 year low.
International buyers account for around a third of sales above $3 million in the New York market but closer to 50% in its equivalent new homes market. The median price of luxury condos in New York rose by 8.2% in the first half of 2013.
Miami continues to record strong price growth, attracting demand from New York professionals as well as South American and European investors and the Hamptons, always a popular location with wealthy buyers, has seen the highest number of second quarter sales since 2006.
The report points out that in New York and Miami, following the artificial spike in activity created by the fiscal cliff at the end of 2012, most analysts predicted a slowdown in 2013, particularly at the top end of the market, but were proved wrong.
The median price of luxury condominiums in New York rose by 8.2% in the year to June, and by 5.9% in Miami. Co-operatives, by comparison, recorded little change in price due in part to the restrictions placed on international buyers by most co-operative boards.
‘The key price determinant in 2013 has been supply, or the lack of it, brought about by tight credit conditions. The number of apartments for sale in Manhattan is currently at a 12 year low. Unable to secure finance, potential vendors are staying put, limiting the turnover of homes in all but the new homes market,’ the report says.
‘The house building pipeline was effectively turned off in 2007 and both Manhattan and Miami sold only a shadow inventory up until 2012 when new projects began to complete. With the development cycle lasting approximately two years we are only now starting to see these projects enter the market,’ it explains.
‘Absorption levels are high, particularly in New York, even at prices of $4,000 per square foot and above. New York’s inventory has not fallen because demand has strengthened significantly, supply has been falling for three years yet sales have only picked up recently. Instead, homeowners are biding their time,’ it adds.
The starting price of the majority of new developments in Manhattan is now around $3 million. Soho, TriBeCa, Upper West Side, Upper East Side and Little Italy represent the markets targeted by luxury buyers. The 57th Street Corridor is increasingly a focus of new development activity and is already home to One57 and 432 Park Avenue.
The median price of luxury homes in The Hamptons rose by 8.2% in the year to June underlining the market’s recovery. The Hamptons remains the location of choice for wealthy New Yorkers looking for a second home, as a result the market suffered post the financial crisis when luxury prices fell approximately 30% from peak to trough.
Waterfront properties continue to attract a premium of 30% with areas around Wainscott, Water Mill, Sagaponack, Bridgehampton and Quogue amongst the main markets targeted.
In the second quarter of 2013 the Hamptons market recorded its second highest number of sales since 2006, increasing by 25.2% compared to the same period a year earlier, although sales above $5 million declined.
The price of luxury homes in Miami rose by 5.9% in the year to June. The city was significantly impacted by the housing market downturn, but has redefined itself in the last two years. Sales volumes are up 20.6% year on year and supply is down 18.8% over the same period.
‘Two key trends have emerged in 2013. Firstly, while capital flows from South America and Europe are highly influential, the volume of purchasers from New York has increased, many looking for a second home rather than a property to retire to,’ the report points out.
‘Secondly, around 73% of all non distressed condo purchases were cash funded in the second quarter of 2013 and have been at a similar level for the last two years. Miami’s boom is not credit financed suggesting that, while double digit annual price growth is not sustainable long term, the recovery does have a firm footing,’ it adds.
This article was republished with permission from Property Wire.