When the recession hit America, Detroit was pummeled. The city famously filed for bankruptcy in July 2013 with debts of US$18 billion making it the largest municipality bankruptcy filing in US history. But after Michigan’s Governor Rick Snyder encouraged its creditors to ‘take a haircut’, the city was able to pull itself out of bankruptcy and today, thanks to a number of deep pocketed investors, optimism is returning to the market.
“There has been an exuberance of investors, developers and residences following the emergence from bankruptcy of the City of Detroit,” says Nanci Rands of Hall & Hunter Realtors, Christie’s International Real Estate. “The commercial market is more active than at any time in the past 20 years.” Among the investors is billionaire Dan Gilbert, owner of Quicken Loans (US’ second largest mortgage lender), who has purchased over 80 heritage properties in Downtown Detroit. Some now house tech firms such as Microsoft and Twitter. The latest, purchased for US$30 million, he plans to turn into a mixed-use development.
Municipal efforts have also boosted development. Early in 2013, mayor Mike Duggan launched Detroit Future City, a planning blueprint that aims to revamp the city’s economy and transform empty land. The combined push seems to be working. The latest figures in the housing market show that Metro Detroit has seen a 13.3 percent bounce in home and condo sales and a 9.3 percent increase in median sale prices from US$149,000 in June 2014 to US$162,000 in June 2015. In July 2015, the National Association of Realtors placed Detroit at number 10 on its ‘Hotness Index’, which identifies the top 20 markets in the US where buyers are being proactive and homes are being sold quickly.
Within Detroit the Downtown area is seeing the most development. New skyscrapers are shooting up on levelled or vacant lots and historic buildings are being restored. The heritage buildings such as the 1920s carved stone Securities Trust Building in the Financial District or Gilbert’s Capitol Park are of particular interest to young buyers looking for an authentic Detroit home. The city’s taxes are high (in 2013 a US$150,000 home carried a tax burden of US$4,988. A home of the same value in New York would be taxed US$1,087) but people are finding loft and studio spaces “at prices that are unimaginable elsewhere in the world,” says realtor Nanci Rands. “Detroit, once again, holds an interest for real cross section of the market—singles, couples, overseas buyers…”, she says.
One group of overseas investors who have shown particular interest in Detroit’s renewal are the Chinese. Property portal Juwai.com listed Detroit is one of the top four places for the Chinese to invest in the US. Some overseas buyers have been particularly attracted to foreclosed homes, but these properties are not always as much of a bargain as they seem as buyers have to cover the back taxes and the properties are often so derelict they need to be rebuilt.
Suburban properties offer a more attractive option. In return for spending a little more time commuting, buyers can find a six-bedroom lakeside property for less than the price of a Singapore apartment. Metro Detroit’s most wanted area is South Oakland county, which includes Birmingham, Bloomfield Hills, Bloomfield Township, Franklin, Bingham Farms and Orchard Lake. Birmingham is the hottest ticket for people looking to buy luxury properties. With its terrace-lined restaurants, cupcake shops and village market, it is as close as you can get to a bucolic life near the city.
Birmingham’s market slowed during the recession, but a number of new projects are now being launched. A two-bedroom,two-bathroom apartment at 400 Old Woodward with state-of-the art features including a facial recognition security system is currently priced at US$2,250,000.
118 Waterfall in Quarton Lake, a four- bedroom, five-bathroom mansions comes replete with views of the lake and its own waterfall and is listed for US$4,995,000.
“You’re seeing new subdivisions again— that’s really what drives the market. When you see subdivision, that’s a sign of significant growth,” says realtor Kendra McConnell Hurd of Coldwell Banker Weir in Birmingham. And price growth has already reached pre-recession levels says Doug Hardy of Sotheby’s International Realty. “With certainty the property values for Detroit and Metropolitan Detroit have significantly increased over the past four years and now exceed their prices before the recession.” Metro Detroit is clearly on the rise and according to billionaire investor Dan Gilbert, the growth is set to continue. “It’s only gaining momentum,” he said recently about his plans for launching new and renovated properties in the city: “It’s not like the announcements are going to stop.”
Detroit at a glance
- Due to the arrival of companies like general dynamics, delphi and borgwarner, half a million more jobs have been created in Detroit since the economy hit rock bottom in 2010.
- Michigan and Canada’s us$70 billion trade relationship will be boosted with a second bridge from Detroit to Windsor scheduled to open by 2022.
- Detroit neighbourhood initiative is a new mortgage programme that helps buyers purchase in neighbourhoods where traditional lenders are no longer available.
Text by Claire Turrell
This Story was first published in Palace Magazine