September 2016
4
For international buyers, of which the majority of upscale apartments are purchased, their decline comes for a number of reasons. The international wealth has seemed to stop buying with the fervor as compared to the years past. All of this can be explained by looking at the countries at a whole. China’s economy has had a sluggish year, preventing their wealthy from making the move to the metropolitan area. The forced drop in oil prices has hurt both Russia and the Middle East, with oil being their top export. Many Latin American countries are also faced with recessions. All of these factors have contributed to the faltering real estate market.
Keeping all of that in mind, there is something that has put agents and analysts at ease of mind. Up 57% from last year, the average sale price for new developments reached $5.4 million. This has helped supplement the drop in sales, providing a buffer from changes affecting the market too negatively.
Being educated and aware of these changes, especially when you partake in the market (regardless of if you have decided to rent, buy, or lease) is important. Similar to when you spend money on tangible products, you should know what to expect and know what can go wrong. If the market stabilizes at the level it is at now, then it is possible that Miller was correct about sustainability.
Make sure to look into every aspect of renting or buying before actually doing so — never go in blind. A great resource for new owners or renters is Angie’s List, while it gives invaluable information for house servicing and answers questions about problems a homeowner may have it also gives insight to other aspects as well. One thing the Editor in Chief of Angie’s List stresses is that there are never too many questions to ask. The site even provides a list of questions to ask if you can’t think of any.
If the sales continue to drop, there’s a possibility that prices (independent from your form of apartment ownership) will rise. To make up for the lack of purchases, the market will need to sustain itself by raising prices to counteract the losses. If you already rent/lease and are under contract, look into your landlord’s ability to change pricing without notice (this is something everyone should know before even signing an agreement).
Unfortunately, in certain cases these issues cannot be stopped once started. You can only be well informed and prepared for the worst. You can’t control the housing market, as much as you may want to, but you can control your preparation if the system goes belly up again. Even if it doesn’t, it’s just better to be prepared.
Photo courtesy of Curbed.