Dive Brief:
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International buyers continue to leave their mark on the U.S. luxury housing market, though their influence isn’t trickling down to its lower tiers, according to Zillow.
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Activity from international investors is expected to slow or remain stable throughout 2017, suggesting that internal factors — rather than external ones — are likely to continue to be among the biggest drivers of housing affordability in the U.S.
- Meanwhile, home-price growth predictions strengthened year-over-year with a 4.8% increase expected for 2017, up from the 3.4% growth predicted for 2017 a year ago.
Dive Insight:
Lack of interest from international buyers is one contributor to the current volatility in the luxury housing market, where Zillow's report found them to have the biggest impact. Redfin recently noted that luxury markets made up primarily of owners who are also full-time residents are faring better than those heavy in foreign buyers.
One city to experience that trend acutely is Miami. That city’s condo market is cooling off as recent overbuilding has driven down home values, making property investment there less attractive. The lack of interest is taking entire projects off the table. The Related Group's Auberge Residences & Spa Miami luxury project hit the brakes last summer before being scrapped in April after selling just 15% of its 300 units during presale. Minimal interest from foreign buyers was one contributing factor.
Presale activity helps justify to lenders — who lately are shying away from large, luxury developments — that a project is worth backing. While the Auberge failed to deliver such upfront interest, another nearby condo, the 64-story Brickell Flatiron, sold 60% of its 549 units during presale. That helped the project snag a $236 million construction loan.
Miami isn’t alone. Other markets experiencing an oversupply of ultra-high-end inventory have seen builders and developers turn to other segments. Toll Brothers said earlier this year that its City Living business was shifting to target New York City’s middle-luxury sector as the top tier of that city's housing market is cooling off.
U.S. luxury home prices came off a flat Q4 2016 to rise 4.2% year-over-year in Q1 2017, Redfin reported. The supply of properties priced at or above $1 million and $5 million rose 1% and 15%, respectively, during the quarter, with strength in Washington, DC; St. Petersburg, FL; and Portland, OR.