No Welcome Mat for Wealthy Condo Buyers in New York

Poor rich people. Luxury property prices in 45 global cities rose an average of just 1.1 percent in the third quarter from a year earlier, the weakest annual gain since the end of 2009. Prices fell 4.4 percent in New York, 3.9 percent in London, and 10 percent in Vancouver, Crain’s reports. 

No wonder. There’s uncertainty at every corner, from trade wars to Brexit, Hong Kong pro-democracy protests, and a populist backlash in some of the world’s biggest and most affluent cities that are imposing new taxes on the rich. New York State recently raised the “mansion tax” and transfer fees on high-end home sales, but stopping short of imposing a “pied-a-terre tax” on absentee owners of luxury condos.

“The safe havens are becoming less certain,” says Dan Conn, chief executive officer of Christie’s International Real Estate. “It’s becoming much more challenging in the hubs to find a high quality place to deploy capital.” 

Global cities like London, Hong Kong, and New York, which seemed to defy housing-market cycles year after year following the 2008 financial crisis, are losing their status as safe places for wealthy international buyers to park their cash – or themselves. 

Even as the flow of investment has slowed, many developers are delivering projects started when the supply of rich buyers seemed destined to grow forever. Now there’s a glut of luxury properties and, as anger mounts over wealth inequality, affordable units are in increasingly short supply. 

“We’ve had an unprecedented run in high-end real estate and now many of these markets are struggling with excess supply or uncertainty,” said Jonathan Miller, president of appraiser Miller Samuel. “‘Uncertainty’ is the most overused word in real estate right now, and probably for good reason.” 

London joined New York and other cities in passing taxes aimed at rich buyers. While the levies effectively raised prices even further, they also provided governments with extra cash for city services, as foreign buyers don’t pay income taxes. In New York, the revenues are being funneled into fixing the broken mass transit system, which few billionaires ever use. Life is so unfair.