The Pied-à-Terre Could Make a Comeback With Buyers Who Want to Maintain Connections to Cities

Outmigration has been underway in many urban areas since the coronavirus outbreak. New York suburbs are experiencing a surge in demand from buyers leaving the city, and in July there was a 44% increase in home sales in New York’s suburban counties compared to July of the previous year

This trend is similar to what we’re seeing here in Seattle and across many major cities around the world. And in Paris, where as many as one million residents departed for country properties in March at the onset of coronavirus, there’s a shift in demand now to larger homes with outdoor space at the city’s outskirts.

However, many wealthy urbanites are aware that eventually, the coronavirus outbreak will abate, and they aren’t willing to bid farewell to their cities entirely. Instead, they’re setting up residences outside the city where they can more comfortably work from home and avoid crowds, while also looking for smaller, part-time apartments in the city.

“We have seen some buyers in London wanting to scale down in order to buy something else out of town,” said Stuart Bailey, Head of Prime London sales at Knight Frank. “They’re not giving up on London—they want to have a pied-à-terre as a base in town. People are balancing their lives in a different way due to the nature of the Covid-19 pandemic.”

In New York, where many offices remain closed for the foreseeable future and the city has delayed the start of in-person learning at public schools until Sept. 21, many are settling into new suburban lifestyles while maintaining ties to the city.

We’re seeing a lot of people who bought houses in areas like Greenwich, Connecticut, in the last six months, but they’re not giving up on New York,” said Tamir Shemesh, a broker with Douglas Elliman in New York. “They don’t necessarily want to live in the suburbs all the time, and they know this is a temporary thing.”

For buyers like these who may want to downsize and maintain a pied-à-terre in the city while spending most of their time in the suburbs, now could be the time to make a move.

Why Pied-à-Terres Have More Appeal Now

Well before the onset of the coronavirus, many large American cities were losing residents. New York has seen its population decline three years in a row, and an estimated 53,000 people left the city in 2019. And for wealthy homeowners, maintaining a part-time residence in the city while spending most of the year elsewhere is nothing new.

For such buyers, who may be working remotely part of the week and have children attending suburban schools, a pied-à-terre would allow them to maintain a connection to the city and easily drop in on the office when they need to.

There is also a new cohort of buyers seeking pied-à-terres in New York: Empty nesters from the suburbs who now see an opportunity to downsize and purchase an apartment in the city. Suburbanites are getting top dollar for their homes and using those gains to buy smaller properties in the suburbs as well as pied-à-terres in the city, say real estate analysts in New York and London.

“We have seen some buyers wanting to scale down in order to buy something out of town, but have a pied-à-terre as a base in London,” Mr. Bailey said. “Most real estate activity now is a reflection of people balancing their lives in a different way.”

Though there has been a surge in demand for country homes as buyers seek more outdoor space and flexibility of use, he said, many investors from overseas still want that prime central London location.

“International buyers don’t want to get out of town altogether, and there is definitely more activity for pied-à-terres,” Mr. Bailey said. “But now, what you might normally consider a pied-à-terre isn’t as small as you’d think it would be. What they’re using as pied-à-terres are decent-sized family homes.”

The situation in Paris, however, is quite different. Typically, Parisian luxury homeowners prefer flats in the central arrondissements, but now they are seeking properties with balconies, gardens, and other outdoor space, which are much easier to come by in the city’s outskirts.

“We have a lot of pied-à-terres on the market, but we don’t have many buyers,” said Virgine de Saint Leger of Paris Ouest Sotheby’s International Realty. “Clients want to own a full house with gardens and their own space. They’re not willing to buy a piece of a shared building anymore.”

That said, Savills Prime Index: World Cities report, published July 30, found that Paris’ prime residential market is still “viewed by many as a safe long term investment and store of wealth,” ranking it the seventh most highly valued city in its index.

What to Know If You Plan to Buy a Pied-à-terre

Buyers of pied-à-terres could face potential hurdles depending on which city they’re planning to purchase in. A bill is now making its way through the New York State Assembly that would raise taxes on high-value second homes, as the state legislature seeks ways to address budget deficits.

“The city needs money, but increasing the pied-à-terre tax could have a severe impact,” Mr. Shemesh said. “Those people moving their families to outside the city may give up on having a pied-à-terre because they won’t want to pay those taxes.”

In Paris, buyers planning to finance their purchase of pied-à-terre may face difficulty in securing a mortgage, which has become harder as lenders prioritize businesses and require larger down payments, according to real estate brokerage Paris Property Group.

But for buyers working with brokers who are keeping close track of the market, there are opportunities for favorable deals on pied-à-terres.

“If the guide price is set realistically in the first place, there’s not so much room to negotiate, and if it’s set too high, the seller is not realistic or not in a hurry,” Mr. Bailey said. “But if the guide price is sensible, the seller is giving themselves 3% to 5% leeway to negotiate.”

Keeping informed about recent trades and using up-to-date evidence in negotiations is key, especially as sellers adjust their pricing to shifting market trends. In Manhattan, for instance, contracts for condos fell by 38% in August compared to the previous year, while new listings increased by 30%, clearly favorable conditions for buyers.

“If you look at transactions in June when we started showing again, you see that week by week transactions went up, but that came at a price. Sellers lowered their prices, which triggered deals to happen,” Mr. Shemesh said. “Things are moving as sellers are adjusting their prices to reflect market value, and buyers are stepping in.”

Original Article Found on Mansion Global