Investors in the French Alps, Hawaii and San Francisco can expect competition but also good returns
As more people are vaccinated for Covid-19 and governments around the globe begin easing travel restrictions, real estate markets, too, are waking up. A February report from Zillow found that 70% of homeowners surveyed said they would be comfortable moving to a new home after widespread vaccine distribution, and brokers are anticipating especially busy spring and summer seasons.
Many high-end secondary markets started heating up in the early days of the pandemic, as buyers sought out more space and privacy in regions where they used to vacation. And now the outlook is especially favorable for a big post-vaccine boost in popular holiday destinations.
“We’ve noticed an increase in inquiries, viewings, and transactions across all the resorts from buyers interested in investing,” said Laetitia Hodson, associate partner with Knight Frank in Provence and the French Alps. “People are looking for a lifestyle investment, and well-being is very important. The pandemic has reinforced that.”
“Demand started in earnest in the summer and led to crisis-level low inventory,” said Matt Beall, principal broker with Hawaii Life. “The high end is definitely a lot fatter in terms of volume, but this is impacting every segment of the market with no signs of slowing. The vaccine and reopening of international travel will bring in the next phase of this.”
It’s not only vacation markets that are thriving, however. In San Francisco, buyers are returning, buoyed by the vaccine and eager to return to urban living, particularly in luxury condos on the outskirts of the city, like the new development on Yerba Buena Island.
“People are longing to return to an urban lifestyle,” said Jeff Samuels, Northern California regional manager with The Agency. “They might not be going back to the office every day, but they don’t want to be two hours away.”
And while inventory is tight, interest rates remain low, making this a favorable time to buy, he said. But buyers in these hot markets should expect plenty of competition and have a plan for standing out to sellers.
“Be aggressive and get as much background work done as you can,” Mr. Beall said. “If you don’t want to be in a bidding war, you don’t want to buy. You’re going to be competing no matter what.”
Markets Getting the Biggest Post-Vaccine boost
Despite the many challenges of 2020, home prices in the French Alps rose slightly by 1.2% year over year, the Knight Frank 2020 index found.
This increase is in part due to low inventory, as many homeowners in Alps resort towns took their properties off the market during pandemic lockdowns.
“Parisians and people from Geneva realized they could spend lockdown in a beautiful chalet, so they took their homes off the market for a few months,” Ms. Hodson said. “There has also been an increase in activity, and interest rates have remained relatively low, which is encouraging people to invest.”
Demand, for now, is primarily from domestic buyers and those in neighboring countries, due to travel restrictions, she added. With France now in a third lockdown, there will likely be pent-up demand released once conditions become safer and the country reopens.
“Looking ahead, Chamonix and Megève may be more of a draw, because in those resorts you could rent out properties not just in the winter but also in the summer,” Ms. Hodson said. “The dual season should make those markets even more attractive in the months to come.”
In Hawaii, indicators suggest that interest will surge in the coming months, particularly once buyers from Japan and Canada—historically the biggest sources of foreign demand—are able to get vaccinated and travel internationally.
“One indicator is high-end vacation rentals, and we’re almost completely sold out there,” Mr. Beall said. “The 2020 market was the most tenacious I’ve ever seen, and now with travel slowly opening, more people are considering buying. If rental demand and booking is any indication, the frenetic demand is only going to go up.”
Sales of luxury condos were down in San Francisco throughout much of 2020, but late in the year there were signs of recovery. In the first quarter of 2021, this segment appears to be on the upswing.
“Sales of luxury condos at $2 million and above were up by 17% in February, compared to the previous year,” Mr. Samuels said. “We’re already seeing as people get vaccinated that they’re starting to feel comfortable with a return to normalcy.”
Advice for Investors in Hot Markets
A common theme across these luxury markets is low inventory and high demand, with competition anticipated to grow even fiercer as travel reopens.
It’s important, then, that buyers consider the rental prospects of the homes they’re eyeing, to ensure they get returns on their investments. Homes in areas that appeal to vacationers for more than one season, that are close to airports, and that are comfortable to work in, all will have more rental potential.
“Across the market, about 90% of buyers are looking to rent out their properties, so it has to make sense financially,” Ms. Hodson said, of the Provence and Alps markets. “Wi-Fi is super important because people are looking to work remotely. Those resorts closer to the Geneva airport will probably have the highest yields, because it’s easier to get to the property.”
Some buyers, though, are setting aside rental considerations and prioritizing homes that they’ll use as more than just occasional holiday residences. Even as more people are vaccinated, many investors have shifted their priorities and are looking for second homes with space for working remotely and where their families can spend longer stretches of time.
“Considerations of how this would behave as a rental are out the window, and buyers are thinking of homes as residences, if not permanent than long-term ones,” Mr. Beall said. “They’re thinking more about space, what the yard is like.”
In San Francisco, now showing signs of recovery after a downturn in the early days of the pandemic, buyers have a chance to take advantage of relative affordability.
“In the beginning of the pandemic, the immediate pushback we saw was buyers not wanting to share space with people. Fast forward a year, and they want to be near the city again,” Mr. Samuels said. “If I’m a buyer, I’m thinking this is the right time for me. There’s been downward pressure on prices, and interest rates are still historically favorable.”
Buyers planning to jump back into the market should be sure to work with a knowledgeable local broker, inform themselves about comps and be clear about what they’re trying to achieve.
And don’t be dissuaded by the competition, experts say, as it may only intensify in the coming months.
“Don’t get dismayed by the frothiness of the market, because there’s still a ways to go,” Mr. Beall said. “There’s a lot of staying power in the recent wave of buying, and I don’t think we’re out of it yet.”