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The transaction garnered national attention last week because it’s the highest price anyone has ever paid for a home in the United States, and $100 million above the previous record.
What is this trophy purchase telling us? What might it suggest? Some real estate and wealth experts weigh in:
Showcasing wealth is still very much “in”
When people accumulate wealth, more often than not, they want to showcase their success. And one of the best ways to do this is by making a large real-estate purchase, says Lawrence Yun, chief economist of the National Association of REALTORS(r).
Or two. Or three. Or more.
Recently, Griffin acquired a London home for about $122 million. Earlier this year, he bought a Chicago condominium for nearly $60 million. In 2015, he bought a penthouse in Miami for $60 million.
Griffin has also spent close to $250 million over the past several years to build a mansion in Palm Beach, Florida.
“Paper wealth doesn’t show; real estate does,” says Yun. The biggest statement purchase you can make, it “shows the world you’ve made it to the top.”
We’re in a period of heightened volatility
“If history is any indicator, there are two ways to accumulate wealth: one way is with precious metals, and the other way is with property,” says Mitch Roschelle, a partner at PwC, and the firm’s U.S. real estate advisory practice leader.
He says, given the current market environment, real estate has the edge.
“The precious metals basket - which today includes all the trading assets such as stocks, bonds and currencies - is a volatile one, and when there’s fluctuation in a volatile market, people rush to the property basket,” says Roschelle. “We’re in a heightened period of volatility and that bodes well for real estate.”
Real estate is (still) a good investment
“Real estate, in the long run, has provided very good returns,” says Yun. “Historically, we’re talking about 4 or 5 percent a year, and in a prime location like Central Park with its population density, there’s an even better chance of appreciation. There’s also no anticipation of Central Park going away anytime soon.”
Yun predicts Griffin’s purchase will easily double in value in about 15 years.
There’s confidence in the long-term prosperity of America
“There’s a lot of foreign money coming into the United States and going into real estate,” says Yun. “America is the most secure place in the world,” and New York City is the country’s top target market.
Adds Yun: “People always see New York City as offering something unique, and let’s not forget - it is the global and financial capital of the world."
Vera Gibbons is the Founder of nonpoliticalnews.com which produces “NoPo” - a free daily newsletter that covers and curates non-political news only within Consumer/Personal Finance; Health & Wellness; Fashion/Beauty; Fitness/Diet.