With a flurry of super-luxury housing on the horizon, two of Boston's top brokers discuss whether you should purchase a home or an investment.
Michael Carucci represents this property in the Back Bay.
The downtown Boston condo market has never been hotter. New buildings are poised to set price records, with penthouses in the new Four Seasons and Millennium towers expected to sell for tens of millions of dollars. That said, potential buyers must carefully weigh several factors, whether they’re looking for a home or an investment property, including the number of unsold units in the neighborhood (low is good) and the percentage of investor-owned condos in the building (high is bad). To provide guidance, we spoke to two experts: Kevin J. Ahearn, owner and president of Otis & Ahearn (20 Park Plaza, 617-267-3500), a top residential brokerage specializing in the downtown market, and Michael Carucci, executive vice president of Gibson Sotheby’s International Realty (277 Dartmouth St., 617-901-7600).
What is the state of the Boston market? Kevin Ahearn: The high end is surging. You have a record average [sales price] of $900,000 and a record median of $650,000. Milliondollar- and-up sales are 22 percent of all transactions. Michael Carucci: We still have a shortage of quality inventory to meet demand.
Where is condo price appreciation in downtown Boston headed in the next year? KA: [Downtown Boston condo prices] rose again in 2013, by 8.1 percent, and in 2014 by 20.8 percent. Over the years, it probably averages in the 5 to 7 percent range. Combined with our limited inventory and strong labor market, that will push up those appreciation trends even more. MC: We’re starting to see the new luxury threshold of $2,000 a square foot.
The interior of a condo represented by Otis & Ahearn.
Should buyers consider buying a condo for investment purposes? MC: It’s location, location, location. If you buy right now and don’t have a lot of debt, you’ll be fine. Anyone who has had issues in the Back Bay in the last 30 years had too much debt. KA: We do have a small percentage of investor buyers downtown—in the 5 percent range. That buyer is typically someone buying into a new construction project early on and expecting that the escalating prices will yield a good return.
For buyers, what stats are the most meaningful? MC: Purists will tell you to spend a little more for the better location. Millennium Partners has done that with Midtown—it’s now an established neighborhood. Would I rather spend $2,000 a square foot to be in the Back Bay or $2,000 to be in Midtown? The safer investment would be in the Back Bay, but I like what they’ve done with Midtown. KA: You want to look at the historical data. You want to look at the inventory of unsold units, looking for areas with low inventory and consistent sales demand, whether it’s the Back Bay, Charlestown, or the South End. But it’s more about looking at individual units in a particular price range and seeing how those stack up. Does a unit have parking? How many units are owner-occupied? Is it an older renovation that needs to be updated?