Strategy: Investing in an ultra luxury building for above market appreciation
Posted by Wei Min Tan on September 2, 2017
The objective of buying in ultra luxury buildings is usually to park funds and ride appreciation. Rental income is a low priority. The buyer client wants the best of Manhattan and feels the appreciation will exceed what he/she may get elsewhere.
There is a rental market for ultra luxury buildings but since rental price is so much higher, the renter pool is small.
The one-bedroom at 40 Mercer above, at $3 million when purchased, featured 14 foot ceilings and super large windows in a building designed by star architect Jean Nouvel. At that time, a luxury one-bedroom was $1.2 million. Hence this ultra luxury one-bedroom was more than double the price of a (mere) luxury one-bedroom. The objective was to benefit from above market appreciation because of the building’s star architect, Soho location and ultra luxury quality.
While appreciation usually exceeds market rate during an up market, ultra luxury prices suffer more during a down market.