Tough times finally catching up to luxury buyers

By Kevin Brass - International Herald Tribune Blog | Published: October 19, 2008;

A villa in the Caribbean sells for $39 million. A Russian tycoon buys a Florida estate for $100 million. Pedestrian New York apartments list for $20 million.

Is the luxury market immune to the problems facing the rest of the real estate market?

This week luxury specialists gathered in Miami for a conference sponsored by the Institute for Luxury Home Marketing. The number one topic of discussion was the state of mind of the vaunted high-end luxury home buyer, who up until now has remained impervious to the ebbs and flows of markets around the world, industry officials insist.

“This is the group still doing business,” said institute CEO Laurie Moore-Moore.

But now all bets are off, amid growing signs the real world is finally catching up to the luxury market. Agents report slowing sales and a new hesitancy in buyers, even among clientele who don’t have to worry about credit or the crumbling stock market.

At the luxury conference, agents said they’ve seen a drop-off in the low end of the luxury market—the $1 million to $2 million range (about €743,000 to €1.49 million). Buyers are not looking for that second home or move-up trophy house right now, they say. But up until two weeks ago, when financial systems crashed, they were continuing to see activity at the highest reaches of the market.

“The buyers I do have are paying in cash,” said Laura Cahill, an agent from the Boston, Massachusetts area. Agents say they are also seeing more activity from “vultures,” buyers looking for the bottom of the market. “People who have been on the fence are buying now,” Cahill said. “And they are unmerciful.”

Attendance for the event was off about 10 percent, but interest remains high as agents look for ways to compete in a “downright predatory marketplace,” Moore said. At the same time international markets are playing an increasing role for luxury agents, she said. More than half of the attendees were certified international specialists, catering to the different sort of luxury buyer emerging in tough times.

“Luxury homes are increasingly not a lifestyle choice, but a portfolio play,” Moore said.

Sharon Simms, a luxury specialist in St. Petersburg, Florida, has also noticed a bump in international business, but with a twist.

“For the first time I’m seeing U.S. citizens looking to get a percentage of their assets outside the United States,” Simms said.