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| Feature |
The Private Resort Home Market: An Investment Outlook
John Ferry Additional Research by Daniel DelRe
06/01/2005
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The decade-long real estate boom has brought especially notable gains to
owners of homes in high-end resort communities. While no comprehensive data
exists about the long-term performance of dwellings in this diverse sector—which
comprises everything from high-end ski condominiums to mass luxury golf
communities and exclusive, limited-membership gated communities with few
homes—anecdotal evidence sheds some light on how different types of properties
in this sector will perform.
| Developers assert that they are careful to manage their assets in ways that will
keep the supply of the most exclusive properties in check. |
Buyers, developers and real estate economists
believe there are three critical issues that bear on a property’s long-term
value (aside from overall economic conditions which may not affect many affluent
buyers): constraints on the supply of new homes of comparable quality; the
geographic uniqueness of a development; and the level of service provided in
the community. Constraints such as zoning ordinances and proximity to airports
factor into the question of whether any given resort can be reproduced—and
thereby lose some of its investment potential. Of course, the overriding but
unquantifiable factor in the value proposition for individual buyers is the
extent to which the property offers the lifestyle they seek.
 | | SPANISH PEAKS, Montana |
Personal
enthusiasm for an exceptional vista, along with hopes for significant investment
gains, clinched the deal for Steven Sigourney, a technology consultant from
Sarasota, Fla. He found it difficult to envision exactly what he would get
for his money as he trudged through the snows of southwestern Montana on a cold
winter day in early 2004, when the resort home community of Spanish Peaks was in
the very earliest stages of development. The hundreds of log cabins and
condominiums envisioned for the 3,500-acre site, 18 miles from Yellowstone
National Park, existed only on the drawing board. Sigourney could only imagine
how the development would eventually appear, once the homes, the 18-hole golf
course and the ski runs were in place.
“When we showed up at Spanish Peaks,
there was nothing but a sales center, and we were out on snowshoes chomping
around trying to figure out what piece of property we wanted,” Sigourney
recalls. Despite having nothing more to entice him than incredible views and a
promise of greater things to come, Sigourney purchased a plot of land on which
the developer would build him a well-appointed, four-bedroom log cabin, along
with an undeveloped ski-in, ski-out lot that abutted the slopes.
At the time,
the undeveloped lot sold for about $500,000, while the lot and the cabin
combined cost roughly $1.25 million. Sigourney hopes to sell the vacant lot in
two or three years for a profit, and keep the lot with the cabin, slated for
completion this summer, for his personal use. He admits that making an
investment of that size without knowing how the community would develop was, to
say the least, daunting. “It was a lot scarier at the time than it seems now
that the cabins are well on their way and the golf course is about a third of
the way finished,” he admits.
Despite the still-nascent state of his new
home and the surrounding community, Sigourney is pleased with his investment.
“For the cabin that we’re building, we’ve seen about 60 percent appreciation on
paper,” he notes. “The lot has gone up by about 110 percent in a year.
Economically, you can’t get that kind of value anywhere else in the States.”
I think everything is a short-term trend, but this has beguiled me because
the vacation home properties are just going up year
after year. |
These impressive returns are one important factor in the current surge in
demand for high-end resort homes. While different developers segment the market
in different ways, most agree that these homes are usually valued at well over
$2 million and are purchased by individuals who own two or more additional
residences. These multiple-home owners are often better insulated from economic
downdrafts than less-affluent homebuyers, so values in this sector of the market
are not tethered as tightly to the economic cycle or market conditions as are
values in the broader real estate domain. Even so, most buyers, like Sigourney,
are pleased with their homes’ investment performance to date.
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