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California Luxury Property: A Mixed Picture In Q4

Harriet Davies Editor - Family Wealth Report 24 February 2012

California Luxury Property: A Mixed Picture In Q4

Luxury home values in Los Angeles and San Francisco slipped in the fourth quarter of 2011 on a consecutive bases, while they rose in San Diego, according to the First Republic Prestige Home Index.

In the fourth quarter, the California-based private bank’s luxury homes index showed values declining by 1.8 per cent in Los Angeles, with an average luxury home price of $1.97 million.

However, agents said buyer activity rose toward the close of the fourth quarter in Los Angeles, according to First Republic, and that activity was strong despite the fact pricing remained flat.

Meanwhile, the San Francisco Bay area saw values fall by 0.3 per cent, and remain around 3.1 per cent cheaper on a year-over-year basis, at an average price of $2.52 million.

This may change, however, as positive effects from wealth creation in the technology sector feed through. "You are starting to see the positive impact of social media IPOs, hedge fund wealth, and interest from foreign buyers," said David Barrett of Warwick Properties Group in San Francisco.

"In the fourth quarter, especially in the last two months, the [Silicon Valley] market really picked up," said Monica Corman of Alain Pinel in Menlo Park.

San Diego bucked the trend, with prime residential property climbing 1.1 per cent in value in the fourth quarter, according to the FRPHI. The average price was $1.64 million in the fourth quarter, which is still 3.7 per cent lower than a year earlier.

"Luxury home prices in urban, costal markets in California were mostly stable in the fourth quarter," said Katherine August-deWilde, president and chief operating officer of First Republic Bank. "Low rates, good values and positive economic news have led to increasing interest in home buying in 2012. San Francisco and Silicon Valley, in particular, are likely to benefit from the strength of the technology and social media sectors."

California is one of the five most coveted regions for wealth managers to have a presence in, according to David Barrett Partners, a New York-based executive recruitment firm, in a recent report on trends in the sector. The other regions are the New York Metro area, Florida, Texas and Illinois.

Conor Hourigan, author of the report and head of US wealth management at David Barrett Partners, predicted that liquidity events in the Bay Area and Houston will continue to drive activity in the wealth management market, buoyed by the strength of the energy and technology sectors.

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