source: forbes.com
http://www.forbes.com/2007/05/10/homes-cities-pied-forbeslife-cx_mw_0511pied.htmlReal Estate Feature
Choice Cities For A Pied-A-Terre
Matt Woolsey, 05.11.07, 12:01 AM ET
Sick of suburbia? A perfect–albeit often pricey–solution: a pied-à-terre.
In French, that means “a foot on the ground,” so called because they were originally meant as basic ground level, second home apartments for the busy business executive to crash during the week–or as a place to cache a mistress.
Today, urban pieds-à-terre are a growing part of the luxury real estate market.
In Pictures: Choice Cities For A Pied-à-Terre
Total home sales may be down, but that hasn’t stopped people from acquiring second residences. Vacation and investment homes accounted for 36% of residential real estate transactions–or 1.07 million–in 2006, according to National Association of Realtors. That number is a new record and represents a 4.7% rise from 2005 vacation and investment home sales.
But buyers of second homes in urban centers aren’t looking for a fortress of peace and quiet. If they wanted that, they’d stay in the suburbs or drive to the country. The pied-à-terre is about being in the thick of things, where the action is.
“Pied-à-terre buyers don’t come all the way to New York City to live in a remote location, like some full-time residents who feel their home is an escape from the madness of the day,” says Harry DiOrio, a broker at Prudential Douglas Elliman. “These folks are coming here for the fun and craziness that New York has to offer.”
Living It Up
In Manhattan, buyers don’t just want a foot on the ground, they want one on the park. Many of the buyers for yet-to-be completed units in 15 Central Park West are looking for a pied-à-terre, agents familiar with the building’s listings say. The penthouse, slated at 6,600 square feet, asks $45 million. That’s more than $6,000 per square foot. At the southwest corner of Central Park, it is within walking distance to Lincoln Center, Carnegie Hall and the Museum of Modern Art.
“[One] buyer works in the city and has been commuting to the ‘burbs for more than 20 years,” says DiOrio. “His children are all grown now and off to college, so he figured he and his wife will spend part of the week at 15 CPW and then spend the rest in their suburban house.”
They are representative of many older couples who are looking to return to the lifestyle of their younger years and to minimize complications stemming from a house of a size they no longer require.
“As they get closer to retirement, they do not want to have the headache of maintaining a huge home in the ‘burbs,” says David Green, a broker at Otis & Ahearn in Boston. “They want that easy-living lifestyle the city has to offer.”
Sound Speculation?
In cities where there’s been a build-up of wealth, the luxury apartment market can often be the strongest real estate sector. And, naturally, a pied-à-terre can serve as a good investment property. In Hong Kong, for example, a strong stock market, hefty tax rebates and mortgage rate wars between banks have produced record sales in the luxury apartment market, according to worldwide appraisal firm Knight Frank. Prices in Hong Kong’s luxury sector jumped 13% from March to April this year, in part because of supply and demand, it reports.
“Purchasing power accumulated over the last few months,” says Alan Child, executive chairman of Knight Frank Hong Kong, “as few new primary luxury residential projects [have] been launched on the marketplace.”
Chance A Condo
That’s all well and good for Hong Kong, but U.S buyers might not want to move so fast. That’s because the U.S. housing market continues its slump, and in some areas condominium sales remain chilled.
“Since the supply curve for condos is quite elastic–they can be built on smaller lots, so a large number of units can be built per acre–they are prone to overbuilding,” says Anthony Sanders, professor of finance and real estate at Arizona State University. “As the housing market cools, condos not only cool but go into a deep freeze.”
A caveat, however, is that in many urban centers, condo prices can run counter-cyclical to both the overall housing market and the regional condo market. That’s because urban areas are already developed and densely populated, and condos are often the newest and most affordable portion of the housing stock. In a tightly packed city, those features keep condos in high demand.
In Miami, for example, median home prices in the overall housing market fell more than 6% from the fourth quarter of 2005 to 2006, according to the National Association of Realtors. Over that same period of time, condo prices in the Southeast, as a whole, fell 6.5%. Condo prices in metropolitan Miami? They went up 3%.
The same goes for many markets seeing slowing growth rates in single-family homes. In New York City, median home prices increased a modest 2.3%, but condo prices exploded at 16.4%.
“Where condos suffer is areas where the demand for newer housing and affordability are not issues,” says Sanders. “Such as coastal, vacation condos or condos around beltways in many American cities.”
All the more reason to buy a pied-à-terre next to an opera house, museum or park in the city center.
