This report is part of PERSPECTIVES, a comprehensive look into the world of prime residential real estate. Access the full report here to discover the latest trends and dynamics shaping the market.
Southern California’s ultra-luxury home sales always draw worldwide attention—and 2023 was no exception.
Music industry power couple Beyoncé Knowles and Jay-Z (whose real name is Shawn Carter) paid $200 million for a Malibu compound, making it the priciest home purchase in California history.
The purchase of the 30,000-square-foot concrete mansion designed by Japanese architect Tadao Ando beat the previous record of $177 million.
The second-priciest transaction last year went to another entertainment power couple, Jennifer Lopez and Ben Affleck. They spent $60.85 million on a 5-acre European-style compound in Beverly Crest. The pair paid cash, according to the L.A. Times, for a 38,000-square-foot home with 12 bedrooms, 24 bathrooms, 15 fireplaces, a movie theater and other lavish amenities.
Mega-transactions aside, the luxury real estate market last year was rocked by “mansion” taxes that took effect in the cities of Los Angeles and Santa Monica.
L.A.’s new taxes—4% on real estate transactions of more than $5 million and 5.5% on sales of $10 million and more—took effect April 1. (Voters approved the taxes, which are meant to raise funds to ease homelessness and housing insecurity.) A month earlier, Santa Monica added a tier to the city’s tax tables that placed a 5.71% tax on property transactions of $8 million or more.
Sales took off right before the laws went into effect.
1940 Bel Air Road, Los Angeles. Presented by Hilton & Hyland
“Prior to those kicking in, you had sellers very willing to make a deal to avoid paying the tax, and you had buyers who were very willing to buy to get a good value,” says David Kramer, president of Beverly Hills-based Hilton & Hyland. “So there was a tremendous amount of activity prior to the implementation of those taxes.”
Kramer says he was closing deals on properties in both cities right up to a few days before the laws took hold. Then, after the sales frenzy, everything stopped.
“It was a dead zone,” Kramer says. The mansion taxes, along with rising interest rates and a scarcity of prestige homes for sale in Southern California, had a cooling effect on the market throughout the region, even among the wealthy.
It was the perception, more than the reality of mansion taxes, that made buyers and sellers skittish. “The sentiment kind of resonated throughout the entire area,” Kramer says, even in Beverly Hills and Malibu, which were unaffected by the new tax laws. Six months later, sales started to pick up.
Once the dust cleared, Southern California’s luxury market ended 2023 on a mixed note. Sales of single-family homes and condominiums in the $3-million to $4.9-million range jumped 24% in December, year over year.
3904 Valley Meadow Road, Encino. Presented by Hilton & Hyland
In the same time period, sales of homes in the $5-million to $9.9-million category dipped 0.9%, and homes in the $10-million-plus category dropped 11.8%, according to the California Assn. of Realtors. Median luxury sales prices were up, except in the $10-million-plus category.
Southern California continues to be a sought-after market for high-end homes. “There doesn’t seem to be a shortage of people who want to spend a lot of money to live in Los Angeles,” Kramer says.
What does 2024 hold? Kramer believes the rally that began at the end of 2023 will bring strong sales this year, especially with an anticipated drop in interest rates that may add more confidence to the market.
And he’s philosophic about the winds of change in real estate.
“The one thing you can always say, and people don’t look at it this way, [homes are] still a place to live. We talk as if they’re a product—the ups and downs, what affected the market—but people still need to move. There’s always going to be transactions.”
