How to achieve a price reduction in new luxury developments? Obtaining it depends on the location of the property, the market cycle and other factors!
Regardless of the market, buyers or investors interested in buying a property in a new building always request some type of concession to close the deal. And almost always, a price cut is your main request, experts say.
About 99% of concession talks are based on prices. While developers may offer increased agent commissions or a package of furniture, buyers often do not care about those incentives too much. The number of developers willing to negotiate depends on many factors specific to each project, such as the city where it is located and how the project is doing in the market, how the developer financed the construction, and whether it is necessary to pay the lenders in a timely manner. specific and the supply or inventory of similar projects with units of similar price in the area.
Market factors drive price reduction trends. When you see concessions in a period of five to 10 years and track what developers are willing to compromise to close a deal, some specific trends of the city emerge based on the fluctuations of the local luxury market.
What is the right time to buy in a new development?
Each new development, regardless of the market, has a strategy to launch its sales and release inventory, whose details are dictated by who is developing the project, where it is located, how big it is, the price of the units, the target market and other factors.
For example, the sales team for a development of more than 500 units in downtown Miami could open a multimillion-dollar off-site sales office, with a full model unit, months before construction begins. The strategy could be to launch offering 15% of the inventory on building plans and increase prices at each subsequent launch until it is completed and all units are sold in two or three years. On the other hand, the sales team of a luxury boutique project could postpone the launch of sales until the building is finished so that potential buyers can enter the kitchens and bathrooms, see the spaces of recreation and experience the view. They can choose to launch some units at a time, in three or five stages, to maintain consumer interest. Regardless of these differences, developers and agents always publish the inventory of a new building in stages, each including some units of choice, for the same reason: Every time you have a lot of something, it is difficult to create urgency. Each phase should have something to drive traffic and be a small representation of the building itself.
In Miami, where there are many new luxury developments competing for the attention of buyers at this time, price cuts in the range of 3% to 8% are typical.
This represents a significant change from about five years ago, when new developments were moving at a feverish pace, and there was not enough inventory to meet the buyer's demand. That was a time when the developers did not negotiate at all. The current market is very different because of high inventory levels and the competitive landscape.
However, the new buildings designed by renowned architects that are being built in the most coveted locations, still stand firm in price and achieve sales speed. In nearby Sunny Isles Beach, where there is an oversupply of luxury inventory that is sold too slowly to the liking of many developers, substantial discounts on prices are common.
While the market is much better than it was in 2009, when there were massive defaults, inventory is sold so slowly that discounts of 15% to 20% are typical, and discounts of more than 30% are not out of the question. Two or three years ago, a 5% discount was more common, but that was when the sales momentum was better. "Some projects are practically selling all their inventory with discounts, because they have to pay their lender.
Meanwhile, in Boca Raton, Florida, north of Miami, e, in Boca Raton, Florida, north of Miami, the situation is more optimistic. An oceanfront building with high-end amenities, located in a country club community, is unique to the area, they have not had to negotiate much about the price. That includes purchases in which they have sold several condominiums to a buyer to create a giant-sized unit. In this case, the only people who got a "discount" were the buyers who entered first.
When a price concession is not possible, developers often offer other concessions to improve the deal and make the sale more attractive from a financial point of view, specifically in markets where buyers have a surplus of options. A developer who can not offer a price cut could offer to pay the stamp duty surcharge. Agents are also not immune to the temptation of an incentive aimed at attracting buyers, some developers in will increase the agent's typical commission from 3% to 4% to encourage them to bring more customers.