• Tue. Sep 26th, 2023

    The Pressure Is On in the Luxury Property Market

    BySharna Bass

    Sep 20, 2023
    The Pressure Is On in the Luxury Property Market

    A shortage of listings and the return of foreign billionaire buyers have intensified the pressure in the luxury property market. According to Caleb Paterson, a real estate agent from Paterson Luxury, less than 5% of multi-million dollar properties are listed on the open market at any given time. This has led to hundreds of high-end buyers resorting to off-market listings to maintain privacy during the sale process.

    Proposed legislative changes by the National party, aimed at making it easier for foreign buyers to purchase luxury homes in New Zealand, have attracted the attention of foreign billionaires. As a result, these billionaires have sent their associates to scout potential properties in Aotearoa. This increased demand has forced real estate agents to actively seek out potential sellers by “door knocking” high-end estates to meet the rising demand.

    It is surprising how many properties worth over $20 or $30 million are sold without the buyers ever viewing the property in person. Instead, they rely on someone from their network or a trusted staff member to make the purchase on their behalf. These confidential off-market listings are not marketed on real estate platforms but are shared only with select buyers through real estate agents’ networks.

    Besides foreign buyers, Kiwi buyers are also contributing to the demand for luxury properties. They are concerned that the return of foreign buyers will drive up prices by 20% in the future. As a result, they are eager to buy now rather than risk paying a premium later.

    Off-market confidential estates have become a growing part of the luxury property market. Real estate agents, acting as advocates, spend a significant amount of time sourcing properties that are not yet officially for sale. Sellers who may not have been considering selling are often motivated by a sizable offer beyond their expectations.

    There is a stark difference in the supply and demand dynamics between the $1.5 million and $10 million-plus luxury property markets. With limited product availability in the higher price range, buyers are more willing to overlook minor flaws and customize the property to their own preferences. Off-market sales also benefit vendors by generating a premium price while minimizing disruption and reducing marketing costs.

    Off-market listings are favored by vendors for various reasons, such as wanting to test the market before officially listing the property, maintaining privacy due to personal circumstances, or needing a quick sale for a specific reason, like moving to another property.

    Despite the overall slow down of the property market, prestige properties in the $10 million-plus price range continue to sell well. The proportion of high-end sales in the $5 million-plus bracket has been steadily increasing since 2019.

    Overall, the luxury property market is experiencing increased pressure due to a shortage of listings and the return of foreign buyers. The demand for off-market listings is on the rise, driven by both foreign and local buyers seeking privacy and a chance to secure prestigious properties in a competitive market.

    – Paterson Luxury
    – Bayleys Ponsonby
    – Real Estate Institute of New Zealand (REINZ)