The brand new Nantucket Cottage Hospital opened last month. The $100m state of the art facility was built with 100% private funding – impressive.
It’s going to be a boon to Nantucket real estate values. For the most part, with noticeable exceptions from Silicon Valley and Wall Street, the wealthy are on the older side of the age spectrum and, for the most part, the older side of the spectrum are more in need of medical services and goods than the younger side. So, many wealthy people that love Nantucket and could afford to buy here wouldn’t because we didn’t have a modern hospital and we’re 30 miles out to sea. Now, we do have a modern hospital, so I think we’re going to see a spike in demand from those that without a modern hospital nearby would have otherwise not considered buying here. Time will tell…
Although, the first quarter got off to a slow start, the market seems to be picking up steam. A main reason the first quarter was down was because buyers simply could not get here because of plane and boat cancellations. Most buyers have busy lives, so when they can’t get on Island the one weekend they planned to come on Island and look at property, they typically can’t fit the trip back into their schedules until spring/summer.
As these YTD numbers show, though, buyers are finding their way to the Rock:
’19 – $237mm
’18 – $344mm ($1bn+ year)
’17 – $247mm ($1bn+ year)
As the saying goes, the harder the battle, the sweeter the victory…
Nantucket has some of the strictest zoning and architectural restrictions in the US and probably the world. So, when an aspect of a property is grandfathered, it usually makes that property more valuable than the same property without that specific aspect grandfathered. For instance, properties are allowed a certain ground coverage percentage per their zoning. If a property pre-dates zoning and is over the current ground coverage percentage, it will have the ground cover overage grandathered and therefore be more valuable than the same property that is required to conform to the current ground coverage ratio.
There’s an Article on the Warrant of Annual Town Meeting that, if passed in the current state, would heavily restrict the installation of pools in most zoning districts and outright ban them in one district. I doubt it will pass because it is so far reaching, but if it does, anyone currently with a pool will be grandfathered and see a windfall of value. If it doesn’t pass, it will probably make owners who were on the cusp of installing a pool, install one because of fear that some form of this article will get passed in the future. So, in that regards, at the least in the short term, it will have the opposite effect of having less pools.
Another record year for the Nantucket real estate market – approx. $1.16bn in total volume. The next closest year was 2005 when the total volume was approx. $1.12bn, so very similar. However, there were big differences.
2018: 473 transactions, $2.45mm average sale price, $1.60mm mean sale price.
2005: 629 transactions, $1.78mm average sale price, $1.19mm mean sale price.
Glorious supply and demand.
The financial effects of the “Airbnb taxes” are yet to be seen. On one hand it could be a major stream of revenue for government, but on the other hand, will it weaken demand thereby decreasing the amount of commerce and making the total size of the revenue pie smaller? Classic example of bigger piece of a smaller pie or smaller piece of a bigger pie.
I recently went to a highly hyped auction at 46 Easton Street last Friday – amazing, waterfront property worth in the 8 figures in my opinion. To put the quality of the property in perspective, although it is basically irrelevant because anyone can ask anything for their property, one of the abutting properties is currently on the market for $37.5m. Absolute auctions can definitely work. There are no “ifs”, “ands” or “buts” with absolute auctions – the highest bidder wins. For this reason, they create a buzz and get people excited. On the other hand, reserve auctions are typically dull and anti-climatic. You don’t know if there is going to be a winning bidder and no matter how much marketing and advertising is done, they don’t create the buzz an absolute auction does. This was a reserve auction. Guess what happened? Only two bidders registered (from what I could tell) and only one of those bidders actually bid, but not enough to meet the reserve. Basically worst outcome for the Seller – they used the auction process to get the property sold, but put the reserve too high and didn’t get it sold. Now the property is not sold and the market is confused if they are a serious seller or not and the property has a failed auction on its history.
$1.1bn closed YTD…
While visiting the picturesque, charming town of Grasmere in the Lake District of England, I was amazed at the similarities to Nantucket:
-land council to protect open spaces giving way to stunning vistas and hiking trails throughout
-historic, well preserved village
-vibrant town with great restaurants and shops
-strict zoning and architecture boards (extremely hard to get a “new build” permit issued)
-outdoors oriented lifestyle with bodies of water being focal points
-strong sense of community and friendly people
-accessible, but takes an extra leg of travel than surrounding towns
-strong real estate market
Naturally, I asked around about the real estate market and basically got the same answer over and over, if the overall market dips, Grasmere dips last and the least and if the overall market rises, Grasmere rises first and the most.
Just like Nantucket, coupling a limited supply with a rising demand makes for a fundamentally strong market.
Much of the time, when a Seller overprices their property it can work to a Buyer’s advantage. Simply what happens is, the overpriced property hits the market. Buyers that were looking for that type of property see it as soon as possible. They look at it and either dismiss it because they think it is overpriced or they make an offer of what they think it is worth, which the Seller inevitably rejects because it is too “low”. Then, the buyers that initially dismissed it or made offers either buy another property or become disinterested. So, all of sudden, the Seller has dramatically reduced the Buyer pool, aka reduced the demand, which reduces the value and the Seller then needs to lower the price below what they could have originally fetched to spark fresh demand. So, as a Buyer, sometimes you think, “Seller, please overprice.”
$882m closed YTD and at least $191m in the pipe…
What’s the opposite of an inedible hotdog (arguably an oxymoron term) – the Limestone lettuce salad from Le Languedoc, the whole roasted Peking duck from The Nautilus, Nathaniel’s 60 Second Steak from the pearl, Huevos Rancheros from Blacked Eyed Susan’s, roasted red and gold beets from dune, The LoLa Burger from LoLa 41, any sushi roll from Sushi by Yoshi, any pizza from Pi Pizzeria, and the list goes on. I’m still a spring chicken, but Nantucket real estate seems to be the soundest investment there is. Couple an amazing lifestyle investment with a historically strong financial investment that shows no signs of changing (keep in mind, Nantucket real estate has a finite, and eventually diminishing, supply, and consistently rising demand and one of the lowest real estate tax rates in the country) and it should prove to be a wise investment.
If you want jumbo shrimp, Cru has delicious ones, but if you really want a dog, try sandbar’s sand dog or Pete’s water dogs at Nantucket Pharmacy or …
$785m closed YTD.
$245m in pipeline.
Amazing the amount of weight a name holds. Whether it be a street name or someone’s name or whatever name. Whether it earns credentials from being the best at whatever and/or just catchy or … – a name can go far. Elon Musk. If his name was Bill Roberts, who knows if Tesla would be alive. Hulbert Ave., Worth Ave., 5th Ave. Scallop – that’s a catchy word…
Opening day Wednesday.
$685m closed. $285m in pipeline.
Whilst ordering Eggs Benedict, my dad asked the waiter, “Do you cut the English Muffin or hand pull it apart?”. Details differentiate – I tend to think Nantucketers – seasonal and year-round – hand pull apart their English Muffins . Nantucket is extraordinary in so many ways, including implementing win-win solutions to questions/situations that arise. Rarely anything happens on the Rock without a strong, healthy debate and thorough questioning. For example, the Town plans to grade the cobblestones and sidewalks on Main Street, so folks want to know how the Town is going to do it – what the process will be, what the sub-surface will be, what tools will be used, etc. Should they be set in sand or asphalt? As one put it in so many words, the cobblestones have been around a lot longer than we and have maintained better than all other surfaces, so let’s do it properly. It’s awesome that debate and questioning is happening. The result of these debates and questions is, Nantucket is consistently ahead of the curve. For instance, we have a new hospital, school, police, fire, water, sewer all while maintaining one of the lowest property tax rates on the most valuable property in the world.
YTD volume: $610m. Strong.
The market continues to show undoubtable strength. Makes sense – equity markets are at all time highs, interest rates are still low, rental market is strong, sun is shining, fishing is on fire and the island is as amazing as ever. Seems like it is going to blow through the $1b benchmark, especially because there is still great inventory. YTD closed volume is $580m, there’s at least $300m in pending deals and we are just entering what are traditionally our two biggest months – September and October.
To potentially add to demand, I heard a rumor there might be a direct flight to the Rock from Chicago next year…