What a weird year it’s been in housing. On the ultra-luxury side, 2014 brought with it several new records. Two nine-figure sales each shattered the previously-held record for America’s most expensive home sale before mid-year. By the end of 2014, a whopping 16 sales had closed at the $50 million price point or higher–a heretofore unheard of volume at this price level.
Meanwhile, as the luxury housing market is clearly on fire, the overall housing market has experienced a dramatic slow-down. Gone are the double-digit, year-over-year monthly price increases of late 2013 and early 2014. In their place: slower price appreciation, declining home sales volume, and new construction down. Economists say the numbers mean that we’ve left the rapid recovery phase and entered a new housing normal (expected to continue in 2015.)
If it seems bizarre that price growth would be slowing down for most of the American housing market while rapidly accelerating on the ultra-high end, perhaps it shouldn’t, given what we know about income levels for average Americans (stagnant) compared to the global ultra-rich (getting richer).
“This super high-end market–$50 million and above–is the circus sideshow,” says Jonathan Miller, president and CEO of Miller Samuel Inc., a New York real estate appraisal firm and consultancy. “It’s a global phenomenon, a phenomenon of the wealthy preserving capital. It’s a long-term investment play that has nothing to do with the traditional housing market as we know it.”
The 16 sales at $50 million or higher stand as proof positive that the American housing market has become a major target for the global (as well as for the domestic) ultra-rich.
“New York, Miami, and Los Angeles are now seen as the key safe havens in the U.S. for investments in property,” says Royce Pinkwater, founder and CEO of Pinkwater Select, a global real estate firm that works with investors. “The deals have grown exponentially in part because of how expensive Europe is, and London.”
Record-setting Sales, Sprawling East Coast Spreads
In April, timber tycoon John Rudey sold his 50-acre Copper Beech Farm in Greenwich, Conn., for $120 million, breaking the record for the nation’s most expensive home purchase. Prior to the Copper Beech sale, the record was held by Softbank billionaire Masayoshi Son, who paid $117.5 million for a Woodside, Calif., estate in late 2012.
Just two-and-a-half weeks later, hedge fund tycoon Barry Rosenstein of Jana Partners bested the new record when he paid $147 million for the East Hampton estate that previously belonged to investment guru Christopher H. Browne. That transaction remains the most expensive home sale in U.S. history.
Though the two nine-figure sales remain 2014′s highest, the year’s volume of 16 closed transactions at $50 million or higher is significantly greater than during 2013, when there were only two. And the 2014 total does not include a handful of transactions known to be at or above the $50 million mark that are yet to close, likely in the early part of 2015.
“Also, some of the deals that are closed and attributed to this year, actually happened last year,” notes Pinkwater. “This is a visual confirmation of what is being talked about last year.”
Manahattan’s Ultra-Luxe Towers
For several years now, New York City developers have been putting up some half-dozen ultra-luxury high-rises south of Central Park, an area that has been dubbed as ‘Billionaires’ Row’. This year, the second-tallest of these towers–which was the first to break ground–closed sales on five apartments above $50 million.
One57, at 157 W. 57th Street, has now sold 80% of its 94 condominiums. The priciest of the closed sales to date went to Silas Chou, the billionaire and former Michael Kors Corp. chair who paid $56.1 million for his full 82nd floor unit, which closed in October. In November, the apartment below Chou’s went to a Del Mar, Calif., family trust tied to a Rebecca Anne Moores; a Rebecca Moores is the ex-wife of John Jay Moores, the former Forbes 400 member and San Diego Padres owner. A Pasadena, Calif.-entity called Lapusny Inc closed on One57′s 80th-floor apartment for $52.95 million in November. In early December, the apartments on the 79th and 85th floors closed for $50.92 million and $55.6 million, respectively, though as of press time those sales had not yet hit public records.
California Trophy Buys
Two of 2014′s biggest sales took place in California. Fleur de Lys, the 50,000-square-foot mansion owned by Suzanne Saperstein, sold to an unknown buyer for $88.3 million in March. Initial reports stated that the property traded hands for $102 million, but those accounts were inaccurate. Even at the lower figure, the sales price is the highest price ever paid for a home in Los Angeles County. The buyer remains a mystery. Although property tax bills for whoever he or she may be are mailed to a law firm that shares an address with the Milken Institute, a Milken representative has adamantly stated that the property does not belong to Milken or his institute.
The second California sale to top $50 million this year was billionaire and ‘Minecraft’ creator Markus Persson’s recent $70 million buy of the Bruce Makowsky’s spec home, which listed for $85 million. Persson paid all cash and closed on the home in six days, according to his broker, Sally Forster Jones of John Aaroe Group. Notable touches of his unique estate: a replica of James Dean’s motorcycle, a chromed Ma Deuce machine gun, and 15 Toto Neorest toilets that cost $5,600 each.
Miami Joins The Big Leagues
Though technically the sale won’t count for 2014, Miami has joined New York and Los Angeles as a major draw for high-end buyers. This year the penthouse at Alan Faena’s Miami Beach Faena House went into contract for a price north of $50 million. However, the exact price won’t be known until the sale closes, expected during the second quarter of 2015.
Miami also had plenty of big price tags hit the market in 2014, including the $139 million ‘Le Palais Royal’ in September, and a $60 million waterfront home in September plus the $65 million ‘La Brisa’ estate in October, both homes on Biscayne Bay.
What To Expect In 2015
Several more sales are expected to close next year that will top $50 million. Chief among them is the One57 duplex penthouse that Bill Ackman and some friends purchased, reportedly for a price at or above $90 million. Another major property expected to hit the records early next year is the 834 Fifth Avenue apartment that New York Jets owner Woody Johnson is rumored to have sold for about $80 million. “No comment,” said John Burger, the Brown Harris Stevens agent who had the listing BHS/Sotheby’s exclusive listing, citing confidentiality agreements. Again, Miami Beach’s Faena House is also expected to close at a price north of $50 million.
Next year will doubtless bring more closed transactions on condominiums at One57, and should also reveal some similarly high-priced apartment sales at its taller neighbor a few blocks east, 432 Park Avenue, now the city’s tallest residential building.
“You have the Europeans sliding into recession, the Chinese trying to extract their wealth and diversify, you have the South Americans–especially countries like Brazil, where it’s extremely expensive to invest–coming here and putting money in real estate,” says Miller.
But at some point, there may be a limit to the demand for ultra-luxury properties at this extreme price point. The dollar has strengthened (now at $1.22 per Euro), and Miller says the narrowing currency spread may take a bit of the “froth” off the international demand for American trophy properties.”I suspect that the volume of these sales at the super high-end is probably going to be hard to beat in the coming years,” he says.