Millennium Tower
If you thought downtown Boston condominium prices were bonkers in 2015, you haven’t seen anything yet.
The average downtown Boston condo price is poised to shatter the $1 million mark in 2016 as a new breed of super luxury towers push values skyward, new stats show.
It is just the latest milepost in a remarkable run. Condo prices in downtown neighborhoods like the Back Bay, Beacon Hill and South End have seen practically unbroken, year-over-year gains in prices since the early 2000s.
The only exception was a short-lived dip just after the 2008 global financial crisis, which saw a brief freeze as prices fell and activity froze before picking right up again in a matter of months.
It is a track record that has made downtown Boston condos one of the most lucrative and durable investments around, with values having doubled in the last 15 years.
That said, as the SEC warns investors, “past performance does not necessarily predict future results,” so there certainly are potential weak spots to keep an eye on as well.
“Buyers are pushing pricing and price per square foot, as they aggressively purchase at even higher price points with no pause, no slowdown whatsoever,” said Kevin Ahearn, president and owner of Otis & Ahearn Real Estate.
The average downtown Boston condo price hit $943,303 as 2015 wound to a close, for a gain of 10.76 percent year-over-year. The median also rose 8.3 percent, to $670,000, Otis & Ahearn finds in its latest market report. A repeat performance in 2016 would easily push the average downtown condo price into the seven figures, while nudging the median past the $700,000 mark.
In fact, a 10 percent gain would be par for the course, representing the annual downtown price gain over the past three years, according to Otis & Ahearn. Add it up, and we have seen a nearly 40 percent jump since 2012. Go back even farther, and the numbers are even more impressive. The average condo price has more than doubled since 2000, when it was $439,152.
A New Level Of Luxury
Scott Van Voorhis
But while these gains have certainly been impressive, Boston’s downtown condo market may be poised for even bigger gains in the years ahead.
The arrival of super deluxe towers like the new Millennium Tower, set to open in 2016, and the Four Seasons, which will start marketing its new condos next year, are shaping up to be game changers.
These opulent skyscrapers are bringing to Boston a whole new level of elite luxury, offering the merely affluent and outright rich everything from private dining clubs to cooking lessons with celebrity chefs.
It’s a whole new price level as well, with the number of condos fetching more than $1,500 or even $2,000 a square feet growing steadily.
The top penthouses at the Four Seasons could very well go for more than $20 million each, while Millennium Place has been seeking a buyer for its $37.5 million penthouse.
In fact, the explosion of ultra-luxury housing is arguably already changing the demographics of Boston, with the city, and especially downtown, seeing an increase in high-income families and individuals, a recent Northeastern University study found. The number of middle-class households in Boston, by contrast, has fallen to just 35 percent, or down eight points since 1990.
Yet it would also be wrong to conclude from all this that downtown Boston condo prices are bulletproof. After all, it’s when people start talking about how real estate values only go up that you have to start worrying, and downtown Boston is no exception.
The real estate boom in Boston so far has struggled to keep up with demand, with more buyers than there are new condos coming online. For example, the Millennium Tower’s 440 condos have been mostly scooped up by now, even though Boston’s newest luxury palace won’t open until the summer.
The same may very well hold true when the condos at the 60-story Four Seasons go up for sale, with the market abuzz with pricing rumors and brokers already fielding initial inquiries from would-be buyers.
But more towers are on the way, including new high-rises planned for the Back Bay and the Seaport, among other hot spots.
There are also signs worth noting that the luxury apartment boom may already be peaking, with developers scrambling to dole out free rent and other goodies in a bid to fill up empty units.
At some point, it is going to become tempting – if it isn’t already – for developers to convert their empty $5,000 to $6,000-a-month rentals and sell them as condos.
OK, it seems unlikely that downtown Boston will get hit with an overflow of luxury condos. But stranger things have happened and we are already seeing something like this on the rental side.
There are also reasons to be cautious about the seemingly endless supply of wealthy buyers and investors. For starters, it is certainly not endless, and could start to shrink should China’s secrecy-shrouded economic downturn grind on. Chinese and other international buyers have played a significant role in driving the luxury condo boom in Boston, but that could change if China’s economy is worse off than what the country’s hardly forthright leadership is letting on.
That said, there really aren’t any major storm clouds building when it comes to the future of the downtown Boston condo market, at least not as we look ahead to 2016. However, if you are interested in buying or investing downtown, keep your eyes open and, above all, don’t drink the Kool-Aid.
