Transaction Highlights, January 17 - 27 East

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Transaction Highlights, January 17

author on Jan 10, 2013

1100 Flying Point Road
Water Mill

The last quarter of 2012 was filled with deals at the lowest and highest price points.

The low-end activity, which is still strong, has been driven by interest rates that have never been lower and have nowhere to go but up. The high-end surge was fueled by fears that long-term capital gains tax rates would rise sharply in 2013, and they have, from 15 percent to 20 percent for those with higher incomes. Over the next few weeks, as the late 2012 sales get reported, the transfer reports will include a heavy concentration of high-end, and possibly tax-driven sales.

This property is located on the narrow barrier beach that separates the ocean from Mecox Bay. It is 2.3 acres of sand, dunes and beach vegetation, with a 2,000-square-foot ranch house and attached garage, built around 1930. Barrier beach land is the most environmentally sensitive and protected land in Hamptons, and this particular lot is mostly pristine. Aside from the house and attached garage, there is a wooden walkway leading to 215 feet of unspoiled oceanfront.

This property last sold in 1987 for $475,000, so the value of this low-maintenance home has compounded at a rate of around 15 percent per year over 25 years. That’s consistent with the very highest rates of return, for the very best properties in the Hamptons, over the last decades.

To get a sense of just how enormous this return has been, if we run the same rate of return out from $14,000,000 for another 25 years, we get a future value of more than $400 million! Of course we aren’t accounting for inflation, real purchasing power, and a movie ticket that might cost $100 by then. Of course, we are assuming that barrier beach lots will be just as desirable as they are now. 
The listing says there’s room for a 9,000-square-foot house here, along with a pool and tennis court. Maybe so. But as Jimi Hendrix observed, “castles made of sand, melt into the sea, eventually.”

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