Posted by Leonard Steinberg of COMPASS on February 17th, 2015

Property price escalations have soared over the past few years in cities such as London, Miami, Aspen, Beverly Hills and New York, in some areas coming off  lows caused by the GREAT RECESSION: Many of the super-wealthy are now asking whether its realistic that pricing escalation can continue at this pace, or if the ‘real-estate-luxury-super-yacht’ has already sailed.

Some very wealthy clients of mine told me a story about their search for an apartment and how they (mistakenly) tried to time the markets…..and lost. Several years ago at a similar time when many were wondering whether the pricing escalation of that time could continue, they decided to put their apartment search on hold, instead deciding to rent till things cooled off and they could buy into the market at reduced pricing. They learned a painful lesson once the recession hit. Firstly, the majority of the best properties were removed from the market as those wealthy owners could weather storms and hold on till the markets recovered. Secondly, when construction ground to a halt, the inventory of great properties started to shrink. Thirdly, obtaining financing was impossibly difficult, even with superb credit and assets. Fourthly, they had wasted substantial time and effort: their kids had grown up in a less stable home environment than one achieved through home ownership. They were running out of space. They had worked hard and were not enjoying their wealth in a way only an owned home can deliver joy, and time was their worst enemy.

Ultimately they resumed their search, found an amazing property, and spent slightly more than had they bought at the ‘peak’ of the market that halted their search. Will the same be true for this market? Its almost a certainty that at some point sales and pricing escalation will slow. This may not be good for speculators, but will it stop home buyers? I doubt it.