Covid-Proof: How Luxury Real Estate Withstood the Crisis
With a prolonged economic suspension and a historic wave of unemployment, real estate investors across the world have been apprehensive. Rents and property values in several cities have already started declining. However, some of the most luxurious properties in the most prime locations have proved remarkably resilient despite the crisis.
Los Angeles is a prime example. After a brief dip in sales in March, at the height of the pandemic-induced panic, the number of contracts signed for homes worth more than $2 million surged 34% in June. According to Bloomberg, local realtors expect the rebound to continue in July and beyond as the market faces “pent-up demand.”
Another market with pent-up demand is Canada’s largest city, Toronto. Sales of luxury homes (defined as those worth over C$1 million) surged 30% in June across the country, according to a report from Engel & Völkers. Meanwhile, prices for Toronto luxury properties shot up 11.9% over the same period.
The trend is playing out in markets besides North America as well. Sales of luxury homes were brisk in Tokyo’s most popular neighbourhoods. The average unit price was 66.68 million yen ($623,000), up 8.7% from the previous year and the highest level on record, according to Japan’s Real Estate Economic Institute.
“Demand hasn’t necessarily shrunk in comparison to levels before the spread of the new coronavirus,” the institute told The Japan Times this month.
However, not all markets have been this resilient. Sales of all properties across the U.K. are expected to be 15% lower than last year. The dip could cause a £27 billion (US$34.77 billion) deficit for the national economy. Meanwhile, the median price of a unit in New York fell to $1 million. This 17.7% drop was the largest dip the city has faced in over a decade, according to the New York Times.
The distress is surfacing opportunities for cash-rich investors. British billionaire brothers David and Simon Reuben have made a push into Madrid’s residential market, bought 222 acres of land on a Spanish island and purchased retail property near Rockefeller Center in Manhattan since the crisis erupted. Meanwhile, institutional investor CBRE Caledon has bought data centers worth $1.6 billion.