WASHINGTON – The global luxury housing market lost some of its sheen last year as financial markets became unsettled and many wealthy buyers began to look for less expensive homes.
"The return of realism," is how Dan Conn, chief executive of Christie's International Real Estate, described the high-end market that stretches from San Francisco to Singapore.
Sales in a sector whose average home prices start at $2.2 million slowed in 2015, increasing by 8 percent, half its 2014 pace. The decline most likely reflects stability rather than weakness, according to a report released Thursday by Christie's.
Properties in London and Hong Kong are sitting on the market longer. On average, homes sold for prices 19 percent below the original asking price, compared with 14 percent below the asking price in 2014. The number of luxury-home sales in the often sizzling Manhattan market dipped 5 percent last year. Falling oil prices led sales in Dubai to tumble 25 percent.
"You can't have massive double-digit growth year after year after year," Conn said. "In some ways, there is a limit."
But a luxury market that experts say is normalizing still looks otherworldly when compared with conventional real estate. Some homes include cigar rooms with specialized ventilation and wine collections displayed in climate-controlled glass walls, for example, instead of in cellars.
Around the world, a single square foot in a luxury home varies dramatically — from $200 in Monterrey, Mexico, to $3,600 in Monaco. The highest price paid for a home last year was $194 million for the Barker Road Estate in Hong Kong, which, judging by pictures, was still something of a fixer-upper.
Not all luxury markets reflected the consequences of weaker global economic growth. The cheaper euro helped to boost pied-a-terre purchases in Paris.
Yet in an emerging trend, the luxury market last year reached beyond the traditional hubs of global commerce and posh resort towns. Places with humbler reputations enjoyed sharp increases in high-end sales, a pattern likely to continue through 2016, Conn said.
Christie's reported a 40 percent jump in the sales of luxury properties in Portland, Oregon, for example. And Auckland, New Zealand, experienced a 63 percent surge in luxury home-buying.
Atlanta, supported by an expanding film industry, reported a 25 percent increase, while an improving auto industry boosted luxury home sales in the Detroit area by 17 percent.
Baby boomers looking to cash out of the Vancouver housing market, which has attracted Chinese expatriates, moved to nearby Victoria, which enjoyed a 45 percent increase in luxury sales.
Other brokerages see similar phenomena at the top-tier of housing. During the first three months of 2016, Redfin reported that luxury sales prices dropped 1.1 percent from the same period a year ago.
Average luxury home prices in Miami Beach, Florida, plunged 13.7 percent to $5.7 million, according to the Seattle-based brokerage. Homes for Boston-area Brahmins fell 11.8 percent to $3.2 million. San Francisco tech gurus saw the average luxury sales price dip 4.7 percent to $4.4 million, while the Washington, D.C., area slid 4.2 percent to $2 million.
The main culprit appears to be a volatile stock market. The Standard & Poor's 500 stock index plummeted until mid-February, only to undergo a jagged recovery such that the net worth of millionaires and billionaires has been in near constant flux. The turbulence has left luxury buyers wary about spending lavishly on housing, said Nela Richardson, Redfin's chief economist.
"I'm not saying there is a recession among the 1 percent, but if you look across all luxury goods you're seeing softness," Richardson said. "I think that is attributable to the stock market."
This doesn't mean an absolute retreat from luxury housing.
In Florida, Boca Raton, Fort Lauderdale and Hollywood have registered price gains after Miami became overheated. San Francisco's recent excesses have spilled across the bay to the more affordable Oakland, where average luxury home prices climbed nearly 50 percent in the past year to $2.4 million.
"There are only so many tech billionaires who can buy in San Francisco," Richardson said.