Just as the combined net worth of the 500 richest people surged by $1.5 trillion in 2023 and the S&P 500 soared, so did the luxury and ultraluxury real estate markets.
In the New York City luxury market especially, cash is always king and can be leveraged effectively as a purchaser. According to Miller Samuel, in the last quarter of 2023 in Manhattan, 67.9% of buyers paid cash for their homes, representing a 17.6% year-over-year jump. Historically, this is normally around 40% to 50%. Generally, in the luxury market, this number is above 70%. In any market environment, there is opportunity for astute purchasers, often as properties linger and days on market increase, resulting in increased negotiability for buyers.
In 2023, per the Olshan Luxury Report, 1,208 contracts were signed for properties valued above $4 million. The trophy market (properties listed above $10 million) totaled 244 signed contracts, the third-highest total in the past decade. The allure of Billionaires' Row remains significant, with six of the top 10 deals of 2023 occurring in this luxurious area, favored by wealthy international buyers with refined tastes. A review of Manhattan's top 10 sales shows a price range from $51 million for a penthouse in Tribeca to the year's highest sale at $80 million for a duplex at 220 Central Park South.
So far, 2024 is off to a roaring start — in mid-January, a penthouse at Central Park Tower, initially marketed for $175 million and last marketed at $149.5 million, is reportedly pending a sale, though the exact amount has not yet been confirmed. Recent closed property records show that a townhouse in the West Village has closed at $72.5 million.
In New York City, as the rates skyrocketed, the overall market leverage has often favored buyers — and for much of the past year and a half, this has been the case. Luxury condominiums, particularly in new developments, have been at the forefront of many significant transactions in recent years. With many of my own clients, we view the opportunity as locking in pricing for future delivery and — depending on when you are purchasing in the development cycle and from whom, and the market dynamics at the point of going into contract — your levels of negotiability and leverage can result in extraordinary purchases, whether you are an end user or purchasing for investment. With this strategy, some of my clients seized upon tremendous opportunities during and emerging from the pandemic.
The thought of nine-figure home sales may have once been unthinkable. However, several dozen nine-figure homes have traded since the pandemic, and the luxury market has continued to perform well — which is not surprising, given the stratospheric increase in wealth in recent years. The new post-pandemic reality of residing between multiple locations has broadened since the pandemic and transformed the real estate market. While commercial real estate may be struggling — as the return-to-office-versus-hybrid debate continues in global capitals such as New York, London and Dubai — those who are highly mobile and with substantial assets are leveraging the assets when an opportunity arises to acquire new properties for their portfolios or, jurisdiction permitting, to rent in the interim as they explore establishing stronger roots and purchasing additional properties.
Quarterly reports are informative but are not real-time market indicators. By the time media is reporting that a market favors buyers or sellers, the tides have almost always already turned. Your best asset is always your team of informed, trusted advisers. As it seems more likely that the Fed will start cutting rates later than expected, it is possible that a larger window of opportunity remains to acquire great assets from motivated sellers.