David Bates provides a snapshot of our accelerating luxury condo market: More and more new condos are geared at the upper crust, prices of existing units are skyrocketing and Millennium Tower alone could represent $1 billion in luxury condo sales.
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The city is not broke
By Gary C
Thu, 05/26/2016 - 10:32am
The city is not broke
Not broke, no.
By anon
Thu, 05/26/2016 - 10:37am
But aren't there looming financial shortfalls? We're nowhere near Chicago/Illinois in terms of unfunded liabilities but there are big gaps in the future obligations we have to retiree health care for city workers and funding. The schools certainly require a lot of money and that's not changing, likely one way or another.
Municipal costs continue to
By Fitz
Thu, 05/26/2016 - 10:33am
Municipal costs continue to rise, mostly though not exclusively in the area of employee healthcare. And Prop 2 1/2 limits how much revenue the city can raise to match that on a yearly basis, it barely keeps pace with inflation. The new construction is not subject to Prop 2 1/2 initially which helps the city offset some of this but as I stated in my initial comment above, the city is still not capturing enough revenue from these very high end properties to do much beyond making up the difference. That's how you get a school budget that increases but has a net deficit compared to inflation, putting aside structural deficiencies in BPS for the sake of simplicity at the moment.
Is medical care boom fueling luxury housing
By EM Painter
Thu, 05/26/2016 - 1:01pm
Most 1% income earners are doctors, dentists, insurance & finance, real estate.
So if I'm reading you right, the medical boom of 4% cost rise per year can't turn into matching growth in land tax income for the city because that number is tied to the overall inflation rate?
So that is why Bernie is winning the young
By EM Painter
Thu, 05/26/2016 - 2:02pm
I wondered why I was seeing young people around me struggling and never making any gains here. The place claims to be booming but regular people who are equipped in all the right areas can't thrive. Also it looks shabby. What is the deal.
Young people are mandated to buy medical insurance that they can't afford to use, or even if they do, they will not as a group use what they are paying.
That money is showing up in high salaries for doctors, dentists, lawyers, finance & insurance people, and real estate people in Boston because it is a medical and insurance center.
The health costs rise at 3.9% (national number), the city is on the hook for that, but the city loses money in real terms because it can only raise taxes 2.5% per year. So it pays out for the health insurance but can't recover the windfall for the doctors.
That's why it's having this effect in Boston. Eventually these lines will cross and every dollar the city spends will be on health insurance. In that world, yes there would be a bunch of doctors and lawyers living in $million condos and candystripers living in the projects and everybody else would be gone.
HELLLLO Bubble!
By Gary C
Thu, 05/26/2016 - 10:00am
In case people can't see this, there is totally a bubble in the luxury condo market. The current pace of building and pricing is totally unsustainable.
In the coming years, something will happen (economic slowdown most likely) and suddenly everyone will be moaning about over supply. There will be bankruptcies and a general resetting of the market. If people are right about 25% of these luxury units being sold to investors (I'm skeptical), those will be the first to flood the market when the economy falters.
So what you're saying is that
By anonyrat
Thu, 05/26/2016 - 10:21am
So what you're saying is that thanks to the overbuilding we're having now, in a few years, housing will suddenly get more affordable? I can't see how that's a bad thing, at least for the non-homeowners! Indeed, this is the way the market has traditionally supplied affordable housing: speculators get too eager and build housing that ultimately never turns them a profit.
Yeah pretty much
By Gary C
Thu, 05/26/2016 - 12:01pm
A million dollar condo isn't going to suddenly become "affordable", but it might drop where "normal" people could consider buying it. Or they will become rental properties at a lower price point than they would demand now.
I think 25% seems comically
By tape
Thu, 05/26/2016 - 10:25am
I think 25% seems comically low.
Who knows? Maybe it is too low
By Gary C
Thu, 05/26/2016 - 10:36am
Let's say it's more than 25% being bought as investments. Once the rising prices on these places slows (i.e. the bubble bursts), there will be a wave of investor sales that will potentially flood the market, driving prices of these places way down.
Today's CNBC Headline
By Stevil
Thu, 05/26/2016 - 10:33am
"Wells Fargo offering 3% down mortgages"
Might as well have been "Here We Go Again"
The difference - the rich may actually take it on the chin this time around. Nobody's talking about a bubble in middle class housing - if anything - there isn't enough. Yet the Million Dollar Babies are everywhere - for now.
People talk about the great Obama economy and how we are in recovery - and we are - but ALL of this is propped up by ZIRP (zero interest rate policy) - and in many parts of the world, NIRP (negative interest rate policy).
There is at some point a limit in the Federal Reserve's ability to keep interest rates low. If/When that happens - watch out - it will blow our real estate market out of the harbor.
Bubbles right now - my opinion - beware longer term bonds and real estate - which is effectively a long term bond.
Great timing
By merlinmurph
Thu, 05/26/2016 - 10:47am
Perfect timing. On a flight out to CA last week, I watched "The Big Short" for a second time.
I thought the feds just
By anon
Fri, 05/27/2016 - 8:21am
I thought the feds just raised rates last fall ?
Ok
By bosguy22
Thu, 05/26/2016 - 12:51pm
Did the Boston market crash during the last economic slowdown? Are you really predicting the economy will slower even more than the current 2% GDP growth rate? But I thought Obama has done a great job stimulating the economy?
It Doesn't Free Up Middle Class Housing
By Cliff
Thu, 05/26/2016 - 10:10am
It turns previously luxury housing into middle class. There was just an article on here the other day about how many people are moving from Millenium Place to Millenium Tower so that they can stay in the newest and most exciting development.
Now the people at Millenium Tower have to lower prices/rent to attract people because they no longer have the swankiest building on the block. Then, people from the 3rd swankiest building move into there, further lowering prices next one down...
Or alternatively, these new luxury buildings are so oversupplied, that they have to start giving away free months rent or other concessions just to fill them.
Increasing supply doesn't always have to come from the bottom up. Oversupply at the top can create downward pressure.
Define "luxury condo"
By Refugee
Thu, 05/26/2016 - 10:45am
What exactly is a "luxury condo" anyway?
Read
By APB
Thu, 05/26/2016 - 11:08am
It is defined in the article.
A Strange Definition
By Cliff
Thu, 05/26/2016 - 2:48pm
The article describes luxury condos as units in a "full service" building that is over 15 units and has parking.
That is a strange definition with multiple problems. What defines "full service?" Having a door man? Having a gym?
There are lots of luxury buildings in the South End/Back Bay that don't have door men. And there are a lot of large full service buildings in outlying neighborhoods that are designed more for middle income owners.
Luxury has to do with fixtures/quality/price, not size and number of amenities.
Worldwide Cash and not so many options
By hydeparkish
Thu, 05/26/2016 - 11:45am
Keep in mind the number of extremely rich Chinese that are trying to escape the air pollution of China, the wealthy escaping from the issues in Venezuela, Brazil, North Korea, etc....and how many safe culturally rich cities exist around world? especially those that they can send their kids to world class colleges in? there is likely a bunch of illegal money being laundered but there is also alot of wealthy people seeking safe places to live. the bigger question not being asked is what is going to happen when all these cultures collide and all the rich from each culture that are used to getting there way 100% of time get it up against one another as neighbors in the condo high rises, with kids in the local private , public schools and colleges?
The insuing conflict
By Gary C
Thu, 05/26/2016 - 12:03pm
....will make for great Uhub fodder for decades to come!
The more, the better?
By anon
Thu, 05/26/2016 - 12:25pm
All those millionaires paying property taxes and barely using any city resources, especially the ones who buy one of those million dollar 500sqft glass box studio as a pied-a-terre - what more could you possible ask for?
Transit and other important
By anon
Thu, 05/26/2016 - 9:12pm
Transit and other important measures for locals can't support endless development.
Bernie wants to know how many rich people can
By bulgingbuick
Thu, 05/26/2016 - 12:35pm
support Boston.
Set limits on not resident
By anon
Thu, 05/26/2016 - 9:01pm
Set limits on not resident ownership like other countries do. We can't build for all possible investors.
The only things that will
By anon
Thu, 05/26/2016 - 9:14pm
The only things that will help long term are reducing the amount of our real estate than can be sold to people who aren't already residents. There is always going to be more demand for investments than what we can build for. Also, we are adding to our population far in excess of stable growth.
Other places prioritize housing for locals while limiting purchases by non residents. Anything else isn't really sustainable.
Uh yeah, good luck with that
By merlinmurph
Fri, 05/27/2016 - 8:27am
So, you're saying that a piece of real estate could only be sold to a current resident?
Sure, good luck with that.
Sounds even more lovely...
By Ahab
Fri, 05/27/2016 - 12:59am
And with the wealthy,comes the aversion to minorities like me. I've resided in my area for some time and have personally witnessed gentrification in tandem with subtle racism. It's typical to see the purse clutchers,the double starers, and such. Boston Strong,amirite? Oh wait-that don't apply to me. Just a gimmick for touristey and moneybags types...
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