In and around West 57th Street, known as Billionaires' Row,

In and around West 57th Street, known as Billionaires' Row, "it's not just slow - it's come to a complete halt," said Dolly Lenz, a broker to the super-rich. Photo: Bloomberg

New York City's ultra-luxury real estate frenzy - with its sky-piercing condominium towers and $US100 million ($131 million) price tags - has finally come to an end.

Even with every conceivable amenity, the eight- and nine-digit prices attached to trophy homes with helicopter views and high-end finishes never bore much relation to actual value. Rather, a class of super-rich investors primarily drove the market, choosing high-priced real estate as their asset of choice, because it was less volatile than other investments and they could use shell companies to hide their identities.

But today a four-year construction boom aimed at buyers willing to spend $US10 million or more has flooded the top of the market just as global market turmoil has caused wealthy investors pull back and the federal government has moved to scrutinise some all-cash transactions.

Since the middle of 2014, prime property values have dropped in Paris, Singapore, London, Moscow and Dubai, said Yolande ...

Since the middle of 2014, prime property values have dropped in Paris, Singapore, London, Moscow and Dubai, said Yolande Barnes, director of world research at Savills. Photo: Bloomberg

It's not just the volatility of financial markets that has big spenders sitting on their wallets. Other global trends that have put the lid on high-end spending include China's tightened restrictions on capital outflows, uncertainty surrounding Britain's decision to leave the European Union, lower oil prices curbing wealth in the Middle East, and tax increases and other measures that have driven up property transaction costs in some countries.

Advertisement

As the volume of sales at the uppermost level has dwindled, some sellers have made drastic price cuts and some projects have been delayed.

Drastic price cuts

Developers of the skyscraper planned for 111 West 57th Street said they would postpone marketing materials and events for condominiums in the building, some priced as high as $US57 million, until next year.

At 432 Park Ave, the tallest residential tower in the Western hemisphere, full-floor apartments originally listed for $US78 million to $US85 million have been split in two and priced at approximately $US40 million each.

In and around West 57th Street, known as Billionaires' Row, "it's not just slow - it's come to a complete halt," said Dolly Lenz, a broker to the super-rich. She attributed the lack of activity along the Midtown corridor to oversupply, little differentiation among glassy ultra-luxury units and peak pricing. "That's a death knell," she said.

New York is not alone. After the global financial crisis hit in 2008, investors turned to high-end real estate around the world as a safe place to park their millions.

Worldwide issue

But since the middle of 2014, prime property values have dropped in Paris, Singapore, London, Moscow and Dubai, said Yolande Barnes, director of world research at Savills, a global real estate firm.

"These cities have acted as a store of wealth," said Barnes, who sees the current decline in values as "an inevitable setback that you get after a long bull run."

Though the market still has a long way to go before fire-sale pricing sets in, the declines may indicate that a ceiling has been reached. And even as sales over $US10 million drop off in Manhattan, the bulk of the market remains robust, with competition particularly heated for homes priced for less than $US3 million.

In the first half of the year, contracts signed for Manhattan residences costing $US10 million or more dropped by about 18 per cent, to 107 units, down from 130 a year ago, according to data compiled by Olshan Realty.

In the Miami area, 216 homes and condos priced at $US10 million were on the market at the end of June, a 43 per cent jump from a year ago, according to data compiled by Esslinger-Wooten-Maxwell Realtors. "By anyone's measurement, that's more than you'd like to have," said Ron Shuffield, president of that firm, pointing out that only 26 houses and condos in that price range sold in the 12 months through June.

"The global misperception was that the demand would be endless," said Jonathan Miller, president of Miller Samuel, a real estate appraisal firm. "The reality was the market was not as deep as what was thought."

Wider net

Developers who cling to their original asking prices are either rejiggering their product or casting a wider net to reach buyers. At the Woolworth Building in downtown Manhattan, where the top floors are being converted to condos, ornate interiors are being toned down in favour of a more contemporary look to appeal to a wider pool of buyers.

To find buyers for Le Palais Royal, a $US159 million mansion in Hillsboro Beach, Florida, that has $US7 million worth of 22-karat gold leaf and a 27-foot waterfall, Joseph Leone, the developer, has flown to London, Los Angeles, Dubai and Singapore to put together a team of brokers to sell the property rather than hiring just one firm. "I believe clients are looking for something unique," Leone said. "They are still here, but you need to change your strategy. You need to be creative."

While prices at the high end continue to set records, that's largely because many of the deals that are closing now involve contracts that were signed as long as 18 months ago, when many of the buildings were still under construction and the market was stronger.

Developers insist that sales at the top are continuing, just at a slower pace than in recent years.

Miller of Miller Samuel was less optimistic.

"It takes a while for sellers, whether in new development or resales, to capitulate to sudden changes in the market," he said. "It's not that there aren't any buyers at this level. It's that there aren't buyers willing to pay 2014 prices."