New state of mind on US property
Buyers in America are looking beyond New York and Florida, to snap up deals off the beaten track. Home goes bargain-hunting
Alexandra Goss Published: 20 January 2013 in the Sunday Times
All eyes are on America, and not only because of the presidential inauguration tomorrow, when Barack Obama will be sworn in for his second term. British buyers are swooping on properties there, too — and looking beyond the familiar Florida and Manhattan to uncharted territories.
The nascent recovery in the American housing market was one of the surprise stories of 2012 — the S&P/Case-Shiller 20-city composite index, which tracks property prices in the largest cities, showed a rise of 4.3% in the 12 months to the end of October, far outstripping industry forecasts. Many analysts expect this to continue, with Goldman Sachs predicting price growth of 2%-3% this year.
Searches for American homes on the listings website Rightmove Overseas rose by 75% in the year to November, and agents report increased interest in “alternative” areas. “Britons have always bought property in America, and the obvious places — New York and Florida — are still popular,” says Simon Conn, a mortgage broker and overseas property specialist. “But locations such as Scottsdale and Sedona, in Arizona, as well as parts of the Deep South, are attracting more inquiries.”
Experts say the turnaround has come about thanks to the supply of bargain property in the country — prices fell by more than half in some cities — as well as the European debt chaos, which has prompted buyers to look further afield. “Some of our business has been driven by people who would previously have bought in Spain, Portugal or Greece, but, since the eurozone crisis, see America as a safer bet,” says Andy Scott, a partner at the broker International Mortgages.
The sprawling desert state of Arizona may seem like a surprising choice for a holiday home, yet searches from Britons looking for property there on Rightmove Overseas increased by 117% in the year to November.
Arizonan cities were among the hardest hit by the market crash, with property prices in the capital, Phoenix, plummeting by 55% between 2006 and the end of 2011.
Yet the city has since staged a remarkable renaissance, with prices bouncing back by almost 22% in the year to October, as investors took advantage of rock-bottom values to scoop up rental properties — and buyers are also looking at other parts of the state. “A lot of Europeans buy properties in Arizona,” says Elisa Andreis, an estate agent at Russ Lyon Sotheby’s International Realty. “Our sunny climate plays an important role, as does the incredible landscape.”
Sitting in the upper margin of the Sonoran Desert, with four mild seasons, Sedona is often used as a filming location for westerns, thanks to its giant red rock formations. A 90-minute drive from Phoenix, the town is a rich arts centre, known for its jazz and international film festivals. A two-bedroom flat would typically cost between $190,000 (£119,000) and $250,000, while you can expect to pay at least $400,000 for a house.
Andreis is selling 10 Opal Court, a four-bedroom house with almost an acre of land, for $1.895m. It has floor-to-ceiling windows that look out over the red rocks, a swimming pool and spa ( 00 1 928 274 1521 , sedonafinehome.com).
Britons are also buying in Scottsdale, which is adjacent to Phoenix. It too has a buzzing cultural scene, with dozens of art galleries and a vibrant nightlife — downtown has been described by The New York Times as “a desert version of Miami’s South Beach”. Family homes here cost anything from $250,000 to more than $10m, but don’t expect huge discounts, as repossession levels in the city have dropped dramatically.
Jeffrey Russell is one Briton who has fallen for Scottsdale’s charms. The 56-year-old from northwest London, who is the president of a specialist construction company, first bought in the area in 2003, and recently traded up to a $1.25m home in the Paradise Valley area. “There are some great bargains to be had in America in terms of what you can get for your money, particularly when compared with London,” Russell says.
A three-bedroom house on Karen Drive, in northeast Scottsdale, with a guesthouse, a rock waterfall and a heated outdoor pool, is on the market for $895,000 ( 00 1 480 283 3009 , arizonarealestate.com).
The warm climate and the potential for property bargains are also drawing British buyers southwards. “You can get great discounts in the South now,” says Philip White, president of Sotheby’s International Realty. “The market correction brought prices down by more than 50% in some places.”
Known for its rich history and well-preserved architecture, Charleston, in South Carolina, was named the best city in America in last October’s Condé Nast Traveler Readers’ Choice awards. Properties in the most coveted parts, however, come with significant price tags. Built by the civil-war photographer George C Cook in the 1860s, 28 South Battery is on one of the city’s most desirable streets, opposite White Point Gardens. The 5,000 sq ft Italian-style residence, which is on the market for $3.995m, has four bedrooms and four bathrooms ( 00 1 843 723 7150 , sothebysrealty.com).
A more affordable option could be the coastal city of Savannah, in Georgia, 250 miles from the state capital, Atlanta. Buyers can choose from a large range of homes, including waterfront and golf properties. A typical detached four-bedroom house will cost between $250,000 and $400,000. “There are some good buys at the moment, both in the beautiful historic area and out on the islands,” says Austin Hill, director of operations at Cora Bett Thomas Austin Hill estate agency. He is selling a four-bedroom home with a private dock, set in more than an acre of land, for $799,000 ( 00 1 912 233 6000 , corabettthomas.com).
On the East Coast, areas such as Charlottesville, in Virginia, are proving popular. Though relatively small, this city near the Blue Ridge Mountains is consistently ranked as one of America’s best places to live, with a host of famous residents, including the novelist John Grisham. A three-bedroom house in Belmont, in the southeast of the city, costs $499,900 ( 00 1 434 979 0005 , charlottesville-area-real-estate.com).
Those who want a big-city pad are increasingly looking at Brooklyn, in New York. While the average price of a one-bedroom flat in Manhattan is $625,000, Brooklyn’s prices are low by comparison — although that could be about to change. “The Brooklyn market has performed exceptionally well in the past year,” says Steve Rutter, managing director of Stribling, Savills’ associate in New York. “Property selling for more than $1,000 a sq ft, previously rare, is now commonplace.”
Buyers can expect to pay as much as $6m for a townhouse in a prime location, but there are less expensive options: Stribling has a four-bedroom limestone terraced property in Bay Ridge for $750,000 ( 00 1 212 243 4000 , stribling.com).
Eagle-eyed Britons have also been looking at one of the most distressed markets in the country: Detroit, in Michigan. It suffered price falls of 39% over six years after the bubble burst in 2006, according to the American property website Trulia, and while values are starting to rebound — they rose by almost 11% in the year to December — Detroit is still the cheapest city in the country. Rental properties can be purchased for as little as $35,000, with companies offering “guaranteed” double-digit returns, but experts urge caution.
“The price rebound won’t last for ever,” says Jed Kolko, chief economist at Trulia. “The city faces slow job growth and has the highest vacancy rate in the country, both of which bode poorly for long-term price gains.”
So the message is clear: if you want to conquer new parts of America, look at the overall package. “I can swim in my outdoor pool in the middle of January, while everyone in Britain is freezing,” Russell says from his Scottsdale mansion. “It’s a nice life.”