The abundance of luxury apartments in the United States affects the price: what to prepare for

Over the past five years, the number of luxury condominiums sold in major cities in the United States has changed dramatically. Sky-high properties have turned into ghost towers. Thousands of unsold properties have flooded the real estate market.

Фото: Depositphotos

“Many developers have overestimated their sales force,” says Painting Campins, a specialist in luxury real estate in Miami.

Major US cities, including Los Angeles and New York, have also experienced a significant surge in condominium construction over the past five years, many of which have remained empty. Economists say the fourth of more than 16 000 new apartments built in the metropolis over the past six years remains unsold.

“The New York real estate market is struggling to take on the wave of luxury condos built in the city after the financial crisis,” said Grant Long, an economist with real estate data at StreetEasy.

“The status of New York and the attractiveness of captured property led to a number of big deals, but the demand among wealthy people on a global scale was not as serious as expected,” he added.

On the subject: How much to earn to buy a house in major US cities

The softening economy in Latin America and China has dealt a huge blow to the elite real estate markets throughout the country. Experts say that the abundance of luxury apartments oversaturated the market, which led to an increase in the number of ghost towers.

“Latin Americans are less interested in luxury real estate, while sellers open their eyes and they often sell at a loss,” said Campins.

According to Fox News from Zillow, StreetEasy, and Luxury Homes Los Angeles, condo sales have plummeted over the past few years. If you look at the period from January to September, in Miami 2016 units were sold in 1260. This year - only 654, which is 48% less. In the same 2016 in New York, they sold an 2141 unit, and this year - only 1724 units, which means an almost 20-percent drop in sales.

In 2016, sales of luxury apartments in Los Angeles amounted to 1518. In the current, this figure fell to 745, which indicates a decline in sales by 51 percent.

Фото: Depositphotos

Peter Zalewski, head of the Condo Vultures real estate consulting group, said that since 2011, the supply of elite apartments available for sale has more than doubled.

“The limited number of luxury apartments available for sale at that time caused a construction boom in South Florida,” Zalewski said. “Today, this has turned into an oversupply in the real estate market.”

Miami developer Henry Torres agrees that there really is oversaturation. But he believes that ultimately, demand will catch up.

Torres added that he spent over 100 million dollars on his last Merrick Manor development in Coral Gables, a suburb of Miami. Therefore, it hopes that the market will gain momentum over time. So far, he has to rent out his property.

Toni Mariotti, owner and realtor of Luxury Homes Los Angeles, said the decline in luxury condo sales indicates potential buyers are unsure of economic stability. He noted that consumers of luxury goods are generally well informed and anticipate market risks.

According to Mariotti, sales in luxury condominiums, or in homes valued at 3 million dollars or more, have not changed significantly. Eight units were sold in the Los Angeles market in September 2019, compared to seven in the same month of 2015.

Agents agree: for the sale of apartments in this competitive market, prices should be much lower. That is, the advantage in negotiating now on the side of buyers. Maybe now is the best time to buy.

“In the conditions of saturation of the market with investors and the emergence of new facilities, New Yorkers should understand that the situation will not change much. Prices for them should fall substantially, ”Long concluded.

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