|
California’s Finest
Buyers are discovering there’s more to San Diego than sun and sailing
| Text : Elizabeth Kerr | Photo : www.thinkstockphotos.com |
San Diego: One of the American west coast’s great cities and something of a hidden gem. Best known for being literally minutes from Mexico, its famous zoo and the great pop culture event that is Comic-Con International, San Diego is also a vital business centre with industries ranging from tourism to defence, shipbuilding to biotech. Forbes claims California’s second largest city is one of the wealthiest and most liveable cities in the United States. If you’ve been to San Diego, you’ll likely recall its laid-back Mediterranean vibe, engaging population and enviable weather. For those and a host of other reasons, San Diego’s property profile is rising — maybe higher than traditional investment hotspots Los Angeles and San Francisco. “I wouldn’t say that,” reasons Edward Galigher, broker/owner of Engel & Völkers La Jolla. “I don’t think it’s a better [investment] than LA or San Francisco; I think California is better than most.”
San Diego’s property market, while not exactly in flux, is at a bit of a crossroads. While normally an owner-occupier market, investment is rising on the heels of 2008’s financial crisis. Prices and sales activity have risen ever so slightly due to widespread foreclosures, which leaves the city and county as a largely entry-level market. Or perhaps it’s a prime location where investors can exploit relatively low prices? Maybe homeowners with equity and renters with ready cash dominate? “It’s all of the above. San Diego County’s a huge place, and I’d say it has all kinds of buyers in it,” says Galigher, “Predominantly it’s owner-occupiers and some investors. Lately a lot of investors have come into the market because of all the distressed property. Those have dramatically increased.”
Schadenfreude doesn’t suit anyone, but that distressed property is buoying the market to a degree. Foreclosures and defaults are decreasing,“andpriceshave actually been rising. Not considerably but a little bit,”says Galigher, pointing out that prices are forecast to jump further about 18 months down the road. Recent sales volume is down chiefly because many available distressed properties have already been snapped up at the lower end. “A lot of entry-level buyers are entering the market. The affordability index is way up now,” in what is a fundamentally pricey locale. A higher percentage of median income earners (up to 40 or 50 percent from 20) can afford homes because of that initial price drop, stirring the transactions the area is seeing.
The market’s slowest sector is luxury, where sales and prices are declining, a trend Galigher chalks up to earlier artificial hikes and a complicated financing picture for premium properties. Government-sponsored FHA or VA loans have very high limits, which aren’t disastrous for mid-range buyers, but at the upper echelon, “your down payments are significantly higher and financing is harder to get.”
Galigher concedes that could be blowback from the global financial tsunami. “The recession began and things started spiralling downhill and some of the banks just weren’t lending money. Now they’re regulating themselves very stringently because they don’t want to make any more bad loans. It’s definitely fallout from what’s happened in the last few years.”
Nonetheless San Diego is holding on as a strong investment option, one of the key reasons for which is a phenomenon familiar to Hongkongers: lack of supply. “I think San Diego’s a great investment market because there’s not that much new building going on,” states Galigher, citing a dearth of single-family detached home developable land. “The demand is increasing but the supply is going nowhere.” The same holds for flats, where prices are at their highest since 2004. According to Colliers International’s Fall 2009 Multi-Family Market Report, strong long-term rental investments can be picked up from those distressed properties, but “an obstacle to investors … is a general lack of supply of available properties.”
One of San Diego’s prime locations is La Jolla, 15 minutes northwest of the city centre, with properties ranging from condominiums to estates overlooking the Pacific. “La Jolla is an absolutely beautiful town built right on the ocean. There’s a lot of topography so everything seems to have views. Lots of people who buy and invest and even live in La Jolla are not from the United States. There’s a tremendous amount of boutiques, restaurants, galleries… all kinds of stuff. It’s a culture unto itself.” And it’s very expensive. Prices in La Jolla are among the steepest in the United States and $20, $30 or $50 million properties are not unheard of. And you thought Los Angeles had all the glamorous homes.
The situation in the city core is a bit more welcoming, though a shift is likely when current stock vanishes. “Downtown San Diego has changed quite a bit. About 10 or 15 years ago [the city] really started to revitalise its downtown and lots of urban, high-density buildings went up,” Galigher begins. “The only thing about [it] is they’ve got a lot of inventory on the market. Prices are still relatively soft downtown, but as people start buying them up …” he almost warns, summing up with, “Nobody’s building anything downtown right now. Once the inventory turns I think you’re going to see an acceleration downtown even more so than in the outlying areas.” Real estate has always been a dance between location and timing, and with all things considered, as Galigher puts it, “Right now it’s starting to look like the right time to buy.”
Click here for local property listings
|
