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While we thought the real estate market had cooled, we have proof that in fantasyland, there is no ceiling.
My colleagues Roger Vincent and Andrea Chang have reported in recent days that even the humble condominium, which was once a kind of starter house on training wheels, costs astronomical sums.
Vincent reports that in Beverly Hills, developers of a 17-unit complex are hoping a single condo can bring in around $40 million. That’s a little steep for me, but I don’t want to rule it out because features include a butler’s pantry, full bar in the entertainment room, and a 2,500 square foot terrace.
It’s unclear if the place is furnished or if appliances — and butler — are included. And these could be deciding factors for me.
Chang, meanwhile, wrote about the posh party thrown for top real estate agents to celebrate the listing of a $50 million condo in West Hollywood. That would be a record in the county for condos, but in LA, such records don’t last long. Chang reported that a $75 million condo is about to hit the market.
For the petite soiree, by the way, each attendee was assigned a personal concierge in case of a crisis, such as perhaps a temporary shortage of caviar blinis, an empty champagne glass, or an overdone truffle filet mignon. Ancient.
I wasn’t invited to the party, but wanted to at least take a look at the building, so I went to the 8800 block of Beverly Boulevard and wandered around. A paint-splattered man named Giovani Quijada was going to the building to do some drywall, and he was shocked to learn that the rooftop unit could cost $50 million.
“Who has that kind of money?” I asked.
“I don’t know,” Quijada said, shaking his head. He told me he made $20-25 an hour building and owned a $400,000 house in Lancaster.
Just down the street, a woman who went only by the name of Crystal was photographing an artist for what looked like publicity shots. She said she lives in the San Fernando Valley, where she is not aware of any $50 million condos.
“It’s kind of ridiculous,” she said.
There was, of course, a homeless person within a block of the luxury condo building. We have about 70,000 in Los Angeles County, and according to one tally, almost 50% of renters pay about half their income in rent and utilities.
“That’s a lot of money,” Jeremy Poole said when I pointed to the high-priced condo.
Poole, dressed in tattered clothes, told me he slept where he could but didn’t rule out going inside again. He looked up at the 50 million dollar roof, smiled and said:
“Maybe one day.”
Nicholas Monaco, a production manager, was dining at a Starbucks and did a double take when I told him about the $50 million house down the street.
“Who the hell wants to live there for $50 million?” he asked, thinking it would make more sense if it was a house in the hills or on the beach.
Monaco, which rents an apartment nearby, told me that if he was wealthy enough to buy a $50 million condo, he would “rather help some people who need it, maybe downtown.”
I pointed out that, on the plus side, people who buy expensive homes pay a lot of taxes. If “people are helped,” he said, he didn’t mind.
In 2015, super-agent Jeff Hyland made this point by showing me around his land in Beverly Hills, where homes listed for over $100 million are not uncommon. Property taxes support government services, Hyland argued, and everyone benefits. On this outing, Hyland took me to a property he had just sold for $35 million.
“It was in absolutely beautiful condition,” Hyland said, but the new owner didn’t like the layout. So he took a wrecking ball into the house to make way for reconstruction.
We have everything, don’t we? A $35 million takedown in the middle of a tent city.
As for the property taxes expected on this $50 million condo, I called LA County Assessor Jeffrey Prang, who helped me crunch the numbers. The buyer is going to have an annual note of $580,000, more or less.
Of that amount, about 40% ($200,000) would go to K-12 schools and community colleges. About 24% ($120,000) would go to LA County for various services. About 15% ($75,000) would go to West Hollywood and the remaining 21% to various state agencies and special districts.
That’s a lot of money, and you have to pay it annually. But as USC professor Ed Kleinbard argued in my column on the $35 million bust, real estate is a big contributor to wealth inequality, and the government subsidizes homeownership. property through various tax credits and deductions.
And there’s so much wealth in the upper tiers of LA that prices continue to rise for everyone, even though the market has cooled off a bit lately. Prang says the estimated value of commercial and residential properties in LA County rose by a record $122 billion last year, to $1.89 trillion. This can be good if you’re ready to cash in, but not so good if you’re struggling to buy your first home or cover the rent.
Prang said many of his employees from the assessor’s office and other local government offices travel to Riverside and San Bernardino counties due to greater accessibility.
“You can’t go to dinner with people after work, and you can’t go to your kids’ ball games,” he said of those who waste hours every day commuting to work and to come back.
In November, voters in the city of Los Angeles will see a ballot measure that would increase the real estate transfer tax on homes and commercial properties that sell for $5 million or more, and Santa Monica has a proposal to increase the tax on sales over $8. million.
Proponents of the LA measure — backed by dozens of housing, homeless services and labor groups — say it would generate $875 million a year for homelessness prevention and affordable housing, l operation being managed by a citizen-led committee.
Keep an eye on this one as the real estate industry braces for a fight, arguing that rising taxes will stall sales and drive big players out of Los Angeles proper and nearby communities.
It’s hard to imagine such an ordeal, but those who bail out won’t have to travel far, if they’re willing to live in a condo.
They better act fast, because the prices keep going up.
