The trade war triggered by U.S. President Donald Trump is also impacting the American luxury real estate market. The escalation of economic uncertainty due to tariffs is causing asset values to fluctuate, leading the primary consumer base of high-end real estate to adopt a wait-and-see approach.
On the 13th (local time), The Wall Street Journal (WSJ) reported in an article titled, "Wealthy buyers pulling out of multimillion-dollar home deals," that President Trump's trade war and the ensuing turmoil in the stock market have frozen what was once a solid high-end housing market.
The WSJ highlighted the case of New York luxury real estate agent Peter Ocean. Ocean noted that a $10.25 million (approximately 14.6 billion won) dwelling transaction was canceled just days before the contract was signed, stating, "I received a call informing me that my client's stock price has fallen by 25% due to the trade war."
Aaron Kerman, a real estate agent in Southern California, recently experienced a cancellation of a $65 million (approximately 92.7 billion won) dwelling transaction in the affluent Bel Air neighborhood of Los Angeles. Kerman said, "Most clients are pausing their purchases amid uncertainty."
The U.S. luxury housing market has enjoyed a boom in recent years. Following the COVID-19 pandemic, the stock market showed vigor, prompting asset owners to embark on billion-dollar dwelling purchases. In areas known as 'affluent neighborhoods' such as New York, Palm Beach in Florida, Los Angeles, and Aspen in Colorado, buying momentum continued even during a period of rising interest rates.
According to a WSJ report citing real estate information provider Realtor.com, the top 10% of asset owners in the U.S. invest 18.7% of their total assets in real estate. As the luxury real estate market has shown strength over the years, the median sale price of luxury homes in the U.S. increased by 8.8% year-over-year as of the second quarter of 2024. This figure is more than double that of average dwellings.
However, the luxury real estate market, which was solid, began to shake after the trade war started following President Trump's inauguration. The trade war has rattled the stock market, reducing the wealth of asset owners. In fact, during the past 3-4 days, $6.6 trillion (approximately 9,420 trillion won) in market capitalization evaporated from the New York stock market.
Julian Johnston, a real estate agent in Miami, reported that a client who viewed a dwelling valued at $42 million (approximately 6 billion won) on the 6th requested to defer the transaction. Johnston also noted that a real estate developer who had proposed $13 million (approximately 18.6 billion won) for a 0.3-acre (approximately 1,214 square meters) Miami lot canceled the transaction.
The WSJ assessed that "in areas closely tied to Wall Street, real estate transactions are accustomed to being affected by the stock market." According to the WSJ, since the mutual imposition of tariffs began on the 2nd, luxury real estate listings worth thousands of dollars have appeared on the market. Steven Shane, a real estate agent who has facilitated numerous ultra-high-end transactions, remarked, "(The real estate market) is a volatile market, and people basically prefer certainty."