Amidst ongoing labor strikes and budget shortfalls in the city, even the ultra-wealthy are feeling the squeeze, with some mansions selling for significantly less than their original asking prices.
Marc Noah, a broker with Sotheby’s International Realty Beverly Hills, highlighted the current market sentiment among buyers, stating, “Buyers feel that they can take advantage of sellers because of where the market is.” In the second quarter of the year, median prices for luxury single-family homes have reportedly fallen by more than 25% from the previous quarter and are down more than 13% year over year, according to a report from Elliman.
The price cuts have been significant. For instance, a newly constructed 19,000-square-foot mansion in Bel Air, modeled after a French chateau, recently sold for $15.8 million, a far cry from its initial $27 million asking price. Similarly, a Beverly Hills mansion, whimsically described as “Game of Thrones meets Harry Potter” in its decor, went for $16.8 million, well below its original price tag of $22 million.
David Kramer, the president of Hilton & Hyland, commented on the current state of the mansion market, stating that while it’s not robust, there’s a definite increase in momentum. “It’s definitely picking up steam. I see it all over the city,” he said.
One factor contributing to the sluggish sales and price reductions is the new transfer tax that went into effect on April 1 in the City of Los Angeles. Under the new rules, sellers are required to pay an additional 4% tax for transactions ranging from $5 million to $10 million, and a rate of 5.5% for transactions exceeding $10 million. These taxes come on top of the existing 0.45% transfer tax, meaning that a seller in Brentwood offloading a $20 million property would now incur around $1.2 million in transfer taxes.
Jonathan Miller, president and CEO of the appraiser Miller Samuel, explained that the tax was anticipated and many potential buyers or sellers tried to get ahead of the change. “Anybody who was thinking about buying or selling essentially poached from the future: Transactions that might have happened now, or next year, were crammed into that narrow window before April 1,” he noted.
Kramer echoed this sentiment, stating that in the months following the implementation of the new tax, the market essentially “dropped off the planet.” The market remained stagnant for nearly two months before starting to show signs of life again.
Despite the current challenges, some experts remain optimistic about the resilience of LA’s luxury real estate market. Rayni Williams, co-founder of Williams and Williams Estates Group, pointed out that many buyers in the $10 million and up market haven’t been significantly affected by global economic factors. “High interest rates aren’t changing their life,” she said.
However, the changing landscape in LA’s luxury market does mean that sellers need to work harder to attract potential buyers. Brokers agree that buyers need to feel like they’re getting a good deal, and properties must offer something unique to stand out. Turnkey interiors, high-end amenities, and stunning views are among the factors that can add perceived value to a property.
As the market adjusts to these new dynamics, brokers and sellers alike will need to adapt their strategies to attract buyers and close deals in a market where discounts are becoming the norm.
Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.
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