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May 24, 2013 6:38 pm
Newport Beach, on the California coast, regularly comes high in the lists of the most expensive property markets in the US. This might be because of its beautiful coastline and its proximity to Los Angeles, or because it has a relaxed, outdoor lifestyle and wealthy neighbourhoods.
What is clear is that Newport Beach property is experiencing a surge in demand that has seen prices of prime homes regularly break the $20m mark. However, things weren’t always so rosy. Like much of the US, the area suffered a big fall in property values when the recession started in 2007. Prices dropped by up to 40 per cent.
But the rise since 2011 has been swift and seems to have taken even local estate agents by surprise. Tim Smith, of Coldwell Banker, says the past year has seen prices rise 15 to 20 per cent. “There’s suddenly a lot more consumer confidence in property, even though the economy isn’t strong,” he says. “This is partly driven by people wanting to put their money into property as a tangible asset and because mortgage interest rates in the US are at a historic low. Plus, Orange County has traditionally been a solid long-term investment.”
Newport Beach is built around an estuary, which also has several island communities, such as Balboa. The main urban hub, Newport Center, has a business district that attracts blue-chip US companies and shopping outlets, which has helped earn it the nickname “Fashion Island”.
There are about eight miles of fine beaches along this stretch of coast, most of which is developed. Residential communities include Newport Harbor, Corona Del Mar and the resorts of Crystal Cove and Laguna Beach. Many neighbourhoods are purpose-built, gated communities such as Irvine Cove in Newport Coast, and Harbor Island, where the 30 waterfront homes comprise some of the most expensive property in the region. A newly remodelled neoclassical-style mansion with more than 91 metres of waterfront, for example, is on the market with HÔM Sotheby’s International Realty at $43m, while the last parcel of buildable land on the island, measuring 1,686 sq metres, is available for $26.5m, via Sotheby’s.
About 45 minutes south of Los Angeles, Newport Beach has always attracted film and sports stars but Smith says agents are now getting more inquiries from financiers, entrepreneurs and board members of successful US companies.
Interest hasn’t just come from local investors: to meet the demand from overseas, European agencies such as Hamptons International and Engel & Völkers have opened offices or formed affiliations with local firms. Smith says a quarter of buyers in the area are now international, up from about 10 per cent a few years ago.
Many buyers want a US-based home to add to a portfolio of properties they will use for a few months of the year and rent out when it is vacant. Carole Meikle, sales agent with Newport Beach’s Engel & Völkers office, says she is getting increasing requests from wealthy European, Middle Eastern and Asian buyers. “These investors typically want coastal property in the prime areas, with a minimum of three bedrooms. They are often collectors of homes and may already own on America’s east coast.”
In addition to a return of confidence in the housing market, limited supply of quality homes for sale has also helped to elevate prices. Meikle says the median price for Orange County over the past year rose from $400,000 to $505,000. She says this was mainly driven by the entry and mid-level sales. “There wasn’t a lot of activity in the high end of the market until the start of this year,” she says. “Now, sensibly priced homes are selling fast across all sectors.”
The current entry level in Newport Beach is about $500,000 for a two-bedroom house or apartment of about 90 sq m. The further back from the coast you go, the cheaper it becomes but Meikle is already seeing a rush for competitively priced homes. “The entry level sector is on fire, selling very fast with multiple offers.”
About $1m to $3m will get you a good-size, two- to three-bedroom family home close to the waterfront in Laguna Beach, or a four- to five-bedroom home, 15 minutes drive inland at Upper Newport Bay. However, it is possible to find two- to three-bedroom cottages or apartments on the bay area of Balboa Peninsula in this price bracket and larger homes, inland but with sea views, from about $2.6m.
Prime homes can easily cost from $10m, which will get you an impressive waterfront property with five to six bedrooms, a pool and, in the right location, yacht moorings.
A six-bedroom mansion in Upper Newport Bay with two guest houses is on offer for $19.5m through Sotheby’s. For something truly palatial you will need to spend upwards of $25m and in return will get seven or more bedrooms and bathrooms, games and cinema rooms, sweeping staircases and Versailles-style decor, extensive landscaped grounds and ocean frontage.
The most expensive home in the area at present is a five-bedroom mansion on an acre of seafront land in Laguna Beach, which is listed with Coldwell Banker for $65m.
Owners of high-end homes can also tap into a lucrative rentals market. Smaller two- to three-bedroom properties in less sought-after locations rent from about $2,500 per month, while homes of $3m plus will rent from about $8,000 to $10,000 per month, depending on size, location and amenities. Many residences are renting on long-term contracts, typically two to three years, but for short-term or holiday lets the right property can bring in $6,000 a week in peak season.
As a result of the thriving sales and rentals markets, Meikle and Smith also report a rise in requests from investment funds, which are adding blocks of Newport Beach property to their portfolios.
● Newport Beach is regularly in the top 10 of the most expensive locations in the US for real estate
● The average number of days a property stays on the market in Newport Beach decreased 13 per cent in 2012
● The number of sold properties increased 40 per cent in 2012 while the number of cash buyers increased 48 per cent
● The average sold price increased last year by $114,760
● The climate of Newport Beach is mild with average temperatures of 17C to 22C
● Newport Beach is on the Pacific Coast, 50 miles from Los Angeles
● The crime rate in Newport Beach in 2012 was the lowest recorded in 40 years, with a decrease of 3.4 per cent in serious crimes and a fall of 10.9 per cent in violent crime
What you can buy for . . .
$500,000 A two-bedroom apartment with waterfront views
$1m An older style, two- to four-bedroom home a few blocks inland
$5m A spacious four-bedroom family home with gardens, oceanfront location and possibly a boat slip
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