The Ultra High End’s New Story
No longer is ultra high-end real estate in the U.S. just about NYC and LA.
Beverly Hills, Manhattan and Miami, along with one or two other cities, have traditionally been the locus of the most expensive and most exclusive real estate in the U.S. Now, in an increasingly diverse geographic mix from Boston to Boulder, more properties align with what the industry calls the ultra or premier market. Uber prices in these locations might not number in the hundreds of millions of dollars, but they are the highest of that market. And, no matter the ZIP code, it’s likely that properties at the very top share similar attributes.
Worldwide, the number of millionaires and billionaires continues to grow, with the U.S. still accounting for the largest share of mega wealthy. “I think the change we are seeing in the growth in the ultra high-end is directly correlated to the growth of significant wealth in the world. More people have more significant money,” says Stephanie Anton, president of Luxury Portfolio International.
“Interestingly,” she says, “it’s diversifying too. In the U.S., no longer is the story just about NYC and LA. Bottom line, the shift in location is a change that influences the high end of the housing market and the demand for significant properties in a way we have never seen before.”
Photo courtesy iStockPhoto.com / Sean Pavone
Traditionally, the very top of the market in Boston was the purview of the city’s legendary Brahmins. But the revitalization of downtown neighborhoods and growth of tech and finance, along with globally recognized educational institutions, are revamping the high end in both the city and suburbs. In 2018, there were 82-percent more luxury property sales than in 2014. Not only are more properties considered high end, but new luxury towers mix with traditional blue-chip estates.
Photo courtesy of iStockPhoto / MattGush
Jonathan Radford with Coldwell Banker Residential Brokerage in New England is representing the highest priced estate outside Central Boston. Woodland Manor is a $38 million property on more than 7 acres, five miles from the city centerline in Brookline. Photo courtesy of Boston Virtual Imaging.
The highest listing in the city is a $45 million penthouse occupying the entire 60th floor of the new Millennium Tower. Jonathan Radford with Coldwell Banker Residential Brokerage in New England is representing the highest priced estate outside Central Boston. Woodland Manor is a $38 million property on more than 7 acres, five miles from city center in Brookline. “Over the past 5 years, we have seen consistent growth in the number of luxury property transactions outside of the city of Boston, in the range of 10 percent to 30 percent per year, with the exception of 2016, when a shortage of inventory resulted in a 2.7-percent decline in the number of luxury sales. In 2018, there were 58-percent more luxury property sales than in 2014,” explains Radford. “In the city, growth in the number of luxury transactions has exceeded 25 percent a year.”
Beverly Hills agent Joyce Rey, head of the Estates Division of Coldwell Banker Global Luxury, has brokered a number of record-setting transactions both regionally and nationally. “I never cease to be amazed at the constant ascension of real estate values. Any look in the rear view mirror at real estate values is always surprising because people realize and regret not buying more real estate. And it seems shocking today because when I founded Rodeo Realty in 1979, $1 million was a pretty major property.” The customary benchmark for luxury in many places has been $1 million. Now, in many locales, including Boulder, Colorado, the $1 million home is basically a redo. Boulder agents say luxury doesn’t begin until $2.5 million,
but even then, as Megan Bach with Colorado Landmark Realtors points out, “some homes are not necessarily luxury.” A more reliable gauge in Boulder, she says, is price per square foot, a measure often applied to premier markets in New York and California. She estimates luxury in Boulder begins at approximately $1,000 per square foot. The highest priced home currently on the market is a $9 million property on 15.42 acres outside of town with extensive views and strong indoor/outdoor connections. Having “great indoor views typically price bumps any home in any neighborhood here, as is the case in any view locale,” says Bach, emphasizing what might be a universal truth for uber luxury: No matter the location, the better the views and outdoor connections, the higher the price.
Utah ay seem an unlikely spot for the ultra high-end, but prices now approach $10 million with the highest residential listing $26 million. Photo courtesy of Summit Sotheby’s International Realty.
“Sales over $10 million are very rare, but I think they are coming,” observes Debra Johnston, with Berkshire Hathaway HomeServices Georgia Properties. Photo courtesy of Debra Johnston.
Along Florida’s west coast, values in upscale resort locales traditionally trailed Miami or Palm Beach. Now, “prices for beachfront in Naples begin at $20 million,” says Tade Bua Bell of John R. Wood Properties. The recent sale of a gulf-front property in the exclusive Port Royal for $48 million illustrates how much demand has changed. The home was eventually torn down and replaced with new construction. Another property also in Port Royal and destined for a tear down sold for $28 million. In the ultra-sphere, a $10 million or $20 million tear down is not an anomaly.
The uber market in Atlanta starts around $5 million to $7 million for new construction. “Sales over $10 million are very rare, but I think they are coming,” observes Debra Johnson, with Berkshire Hathaway HomeServices Georgia Properties. “Buckhead is running out of large land lots, which is driving up the cost to build a dream house. The time it takes to build a new luxury home in the $5 million range could take up to 2 years. Many prospective buyers are instead buying the best flat lot they can find in a resale, and renovating the house to their taste level,” observes Johnson. In Atlanta, Los Angeles and other cities, lots suitable for prestige properties are at a premium.
In New York City, ultra luxury starts at $10 million, but Martin Eiden of Compass Real Estate says if you are looking for the “Wow factor” you have to be in the $18 to $40 million range. And anyone considering a trophy — what Eiden calls “I made it big” — property, generally has to look at $60 million and up. In the ultra-sphere, trophy properties often have over-the-top list prices. Greenwich, Connecticut, is a blue-chip bastion for prestige properties. Topping price points is a mid-country European style estate offered at $29.5 million, followed by a $22.5 million property, also in a premier estate setting. Old money locales tend to be timeless. In the Washington, D.C., metropolitan area, uber prices currently do not exceed
the $20 million mark. The exception is a $62 million estate in McLean, Virginia, on 3.2 acres overlooking the Potomac and comprised of a main residence and The Marden House, which was designed and constructed by Frank Lloyd Wright in 1959. Also extraordinary is underground parking for 30 cars, bespoke interiors by Thomas Pheasant and some of the finest views of the river in the region. In the ultra realm, truly singular properties, particularly those with provenance, often merit singular list prices. Parking for dozens of cars might seem over the top, but garage space and parking are both important to high net worth buyers, according to Rey. What else is considered a must-have? Smart home tech, larger closets, a gym, kitchens and great rooms that flow, screening and media rooms. But, Rey emphasizes, “Location is still the number one consideration for buyers.”
The increasing diversity of locations in properties at the highest price points is basically a numbers game: more buyers, greater degrees of wealth, and price appreciation in the overall market. Simply, there are more people in more locations with greater net worth. Utah is an unlikely spot for the ultra high-end, but prices now approach $10 million with the highest residential listing at $26 million. The market changed in 2016, according to Kerry Oman, with Summit Sotheby’s International Realty in Park City, who brokered the sale of a $13.5 million property in Provo Canyon, the highest-priced transaction in recent years. For the ultra market, the $5 million to $7 million range is typical, and $7 million to $10 million is no longer the exception, says Oman. In spite of growing national interest in Park City, demand for uber properties is most likely to come from home-grown wealth. In the ultra-realm, U.S. buyers dominate a majority of locations today.
“A lot of money is coming out of Silicon Valley, and Seattle now. And we’re seeing a great migration of significant wealth to more resort markets like Hawaii, Florida and Texas, due to an aging affluent population and also attractive tax laws,” shares Anton. Taxes are only one driver for a new geographic mix of buyers in Florida and Georgia. Even before the tax law was passed, brokers like Bua Bell were reporting more interest from Colorado and California. Brokers in Naples and other cities are also seeing buyers from New York, New Jersey, Massachusetts and Connecticut. Johnson says there has been a big increase in out-of-state buyers in Georgia in the last year. Ultra-luxury buyers in Greenwich have broadened in terms of their use of these properties and what they are looking for, observes Robin Kencel with Compass Real Estate. Some plan to make Greenwich their fulltime residence. Others are looking for a weekend or a summer retreat. “As people discover Greenwich’s natural beauty, from having four beaches to 600-plus nature trails to a breadth of year-round activities and its sophisticated, diverse and wholesome vibe, it is becoming an attractive alternative to the Hamptons,” she says.
In the Washington D.C., metropolitan area, uber prices currently do not exceed the $20 million mark. The exception is a $62 million estate in McLean, Virginia. Photo courtesy of Gordon Beal.
Sui generis is how some characterize the ultra market, but as distant and disconnected as it may seem, the ultra sector does not exist in a separate vacuum. “Everything’s fluid in luxury real estate,” says Gary Gold with Hilton & Hyland in Beverly Hills, noting it’s not like the stock market where there is a definite price at the closing bell. “It doesn’t work that way. There are so many nuances. In general, when you have record sales, when you have record numbers of sales, when you have lots of positive activity, it has an overall significant effect on everything,” he explains.
“The rise in significant prices is a reflection of demand but also is consistent with the rise we’re seeing in luxury prices across the board,” says Anton. “According to Realtor.com, in Q4 of 2018, prices in the top 5 percent of markets in 1,000 U.S. cities closed at an increase of 4.7 percent year over year. It’s a bit of that old saying, ‘a rising tide lifts all boats.’” With pricing heading into the stratosphere, an ultra purchase might seem capricious — a product of desire rather than a well thought
out choice. Instead, no matter the price, it’s still a question of value. Every once in a while a buyer might make a crazy purchase, but agents say that’s a very rare occurrence. Even though prices might be well into the tens of millions, Gold says, “It’s not about the money. It’s about how everyone wants to make a smart purchase, and no one wants to be a chump. For the most part, when they make that purchase, people want to feel they have made a prudent, valuable purchase. People who are worth a lot of money are very used to making very very expensive acquisitions, whether it’s in business or personal.
They know how to wrap their head around these very large purchases.” “These buyers are highly sophisticated consumers and active in multiple luxury asset classes, from cars to art to jewelry. They want to know that beyond enjoying their property, they have made a sound business decision,” says Kencel. Ultra properties might be extravgent and indulgent, but the ultra buyer’s focus is still value and investment. When there are several properties on the market at the highest prices, agents often say, “When one sells, the others will to.” Surprisingly, experience does validate this claim. “If you see homes that are setting new precedent, I think it definitely is an endorsement in an area and a price range,” says Gold. Several years ago, Gold broke the $100 million price point in Los Angeles with the sale of the Playboy Mansion. “No one ever sold something well over a $100 million. Since then, we’ve seen more really big sales than ever before. It’s definitely a validation of an area, and people get more comfortable spending more money, so it’s a good sign.” And the impact trickles down. “The second I sold something for $100 million, all of a sudden the $5 million listings are now worth more.”