The world economy and the turmoil that surrounds it, is usually an indicator of where the winds will blow when it comes to the high end consumers. These consumers could be for the luxury travel, automobiles, gadgets, vacations, jewels or for luxury real estate. In this section we are going to discuss about luxury real estate specifically and try to understand the challenges & opportunities that lie ahead for luxury homes in the year 2018 and beyond.
Image Source: Pexels.com
When it comes to luxury housing and luxury real estate there are traditional global powerhouses in terms of locations like London, Sydney, New York, many cities in Europe, South Africa, Singapore and others. As the world economy spins the roll of the dice has ensured that there are many new kids on the block in terms of Luxury real estate favorites which includes many new locations in Asia like China, India, South Africa, Dubai & other location is the African continent. Apart from these there are many new locations from the established countries of Europe that are emerging as luxury real estate destinations for the rich and famous to park their money and build a luxury portfolio.
It is predicted that there is going to be a huge challenge in this year to coax the wealthy to part with their wealth by investing in luxury properties globally. There is an air of uncertainty and there is hesitancy in investing “abroad” because of the shifting global market scenario. Right from the tax code changes in America to the Brexit after effects in London, there are huge challenges to overcome for the global real estate industry to bring the zing back to the investment table.
The good thing however is that there is many new avenues that have opened up due the changes and the new age real estate developers are coming with brand new ideas to attract the luxury buyers again. The level of amenities, the kind of amenities, the designs, communities and the new depth of customization that is happening in the luxury real estate market globally is jaw dropping indeed.
In this article we will discuss about the impact of current changes on the Luxury real estate market and the forecast of luxury homes for 2018 in 2 prime locations: New York & Dubai.
The Tax Angle
The biggest challenge and anxiety hovers around the implication that the new tax structures will have on the luxury real estate segment. Right from the stamp duty hikes in London, Sydney to the major tax changes in America, the year 2018 is seeing a major tax change and this is generally bad news for the real estate market overall, let alone luxury housing. However, since the purchase prices of luxury housing are very high, the impact of tax & stamp duty hikes is amplified multiple times and the immediate effect is drop in transactions substantially and this is already happening in these real estate markets.
The interest from majority of foreign buyers and investors has been dampened in a big way as they try to find ways around to avoid paying such huge taxes. The fact that one is buying in a foreign land compounded with such high tax liability makes it very difficult for any investor to take a positive decision. Apart from foreign investors even domestic buyers have felt the pressure and are shying away from big ticket purchases (read luxury homes) in America as Congress puts a cap on tax deductions for property taxes and interest on mortgages. As per real estate industry experts, the withdrawal of tax deductions for state and local income tax is likely to result in a change as property investors plan to leave high-tax states like New York and Connecticut for homes in places like Florida, where there are no state income taxes. This is the very reason that there are many new locations that are being touted as the next real estate investment destinations within a country and also globally.
The same problem of tax increase has been plaguing luxury real estate transactions in erstwhile favorite luxury destinations like Sydney and London and it is predicted that these markets will continue to slide further down as foreign investors and second-home buyers are shying away from these locations to look for opportunities elsewhere.
Luxury real estate in New York
One of the most attractive global locations in terms of luxury housing, New York has been witness to falling prices especially in the luxury housing segment. The stagnation in the property market here has made many investors and sellers realize that the only way forward is to reduce prices. In fact the number of transactions, because of the price corrections, has increased in New York and this trend is predicted to continue in 2018 which is good for the overall health of luxury real estate market.
These prudent rate reductions have increased the luxury property sales in New York by more than 6% and this is a good indicator of the things to come for New York as a luxury property destination.
The top most real estate developers in New York are getting hold of the ever decreasing land parcels at exorbitant prices and coming up with the most high end luxury homes one can imagine ins pite of the lull in the property transactions. The area around the Central Park region in New York is seeing a lot of action in terms of luxury housing and there are developers here who are trying to woo the big investors to invest here.
New buildings include Central Park Tower, at 220 Central Park South, where the average price per square foot hovers around USD 7,000. There is 111 West 57th Street almost costing USD 5,700 per square foot and also the famous 220 Central Park South boasting of luxury homes including quadruplexes pitched around USD 250 million.
In essence the slowness of the buying has not affected the supply of luxury homes in New York and because of this luxury homes supply boom in the luxury market, 2018 is predicted to be year which will see further fall in transactions in the New York luxury market. Basically it is going to be a case of too many expensive homes searching for buyers from a very small bunch of billionaires. The wealthy real estate investors are going to be spoilt for choice indeed.
Luxury real estate in Dubai
Luxury real estate and luxury homes in Dubai have definitely come of age as the best real estate developers have indeed developed some of the most luxurious properties that mankind can imagine. However a host of factors including oversupply, changing world economy dynamics, internal challenges have stifled the property price growth and have caused the prices to decline gradually in this global city called Dubai.
Dubai real estate market has continued to decline in 2017 and it is predicted to do so further in 2018 too. The price decrease, however, is happening at a much slower pace indicating that a bottoming out is around the corner.
As per property professionals and real estate experts – luxury housing has been affected adversely and Villas (the most preferred luxury home type in Dubai) have performed very poorly in the last couple of years. The sales of Villas in Dubai have been hit and have continued to slide down further in 2018.
The Dubai market as in mid 2018 is in a state of challenge, to put it mildly. The
The current geopolitical activities in the gulf area have definitely impacted the UAE overall and have resulted in a bit of hiccup to the overall property buying and investing sentiment here.
Generally Dubai has always stood out unaffected and has grown positively even with all tensions that keep simmering around in the region overall. This time, however, there has been an adverse effect on the real estate scenario in Dubai.
Even the marvelous Burj Khalifa in Dubai is seeing a somber period in terms of the prices compared to a decade back with almost 70% lower values. The luxury homes in the majestic Arabian Ranches are less by more than 30% compared to their highest prices a few years ago.
Surprisingly the mood and attitude of Dubai real estate developers and Dubai real estate professionals is still very positive. There is a lot of supply coming in the Dubai real estate market – in the affordable segment, in the mid budget segment, in the luxury segment and also in the ultra luxury property segment.
Dubai is a larger than life city and it lives king size indeed. Even in Dubai real estate, the developments are more inclined towards luxury housing, Villas, mansions and ultra rich apartments including town houses, duplexes, penthouses, etc. The mismatch in terms of the requirement in terms of budget and the actual availability is beginning to show. In terms of volumes there are lower and middle income group buyers in Dubai compared to high end home buyers. This has become a major factor in moving real estate inventory in one of the most favorite cities in the world. There are about 80,000 units targeted for possession in the coming 3 years and the need is for more than 100,000 plus units. This is actually good news in terms of the existing demand. The only challenge is to negate the price mismatch. 2018 for Dubai looks to very challenging and testing at the same time. It depends on how the real estate developers like Damac Properties, Sobha Developers, Emaar Developers, Azizi Developers, Ellington and many more respond to the situation and come up with smarter housing options.