FORBES

Real Estate Feature, May 2007

'Most Expensive Beachfront Homes'

"  Break out the flip-flops and swim trunks, beach season is right around the corner. The only question is, in which of the country's crop of uber-luxe beachfront homes to invest ? A $40 million, 22,000-square-foot mansion on a secluded island in the Pacific Northwest or Shaquille O'Neal's house on Miami's Star Island ? Decisions, decisions.

    "Each beachfront location has a distinct personality", says Steve DiFrancesco, a broker at Hunter, Reed and Company Inc., a Philadelphia-based luxury real estate company with listings in Nantucket. "The Hamptons are known for a fast-paced social scene, Nantucket is much more relaxed and low-key. High net worth buyers will seek out the places which match their own lifestyles and personalities", says DiFrancesco.

     Or, put the east to your stern and head to Hawaii. There in the shadow of Maua Kea you can buy a $31 million beachfront mansion on 10 acres of shoreline and spend your days playing golf and swimming in your private cove. For the sunshine sans sunburn, a 16,490-square-foot, Seattle area Georgian mansion might be the answer. Perched atop a secluded bluff, the 1920's home boasts a home theatre and a formal ballroom, should a full day of kayaking exceed your level of SPF.    

     Beachfront property might be among the most sought after, but that doesn't mean it sells the quickest. "Agents who sell in coastal areas love waterfront listings because they are the top of the market," says Harry DiOrio, the Prudential Douglas Elliman broker for a $33 million Shelter Island manor. "But since it sells for a higher price, easily twice the price as one not on the beach, it isn't necessarily easier to sell.".

     Double might seem like an anecdotal overstatement, but there's just something about the sound of the waves that loosens buyers' purse strings. In Nantucket, a waterfront lot smaller than an acre recently sold for over $5 million, a new record price per acre. The interior lots behind it sold for less than half of that.

     "In the case of Nantucket", says DiFrancesco, "waterfront property will always command a substantial premium, because there's such a finite supply and an almost infinite demand. Owning property on Nantucket has become as much about making a lifestyle choice as about acquiring a great long term asset."

     That is, as long as you're not too close to the ocean. A little over half of Florida's 825 miles of sand beaches are experiencing some form of significant erosion, according to the Florida Environmental Protection Agency. That is an increase of 31% since 1989. Thinking of dropping a cool $10 million on a beach home in the Sunshine State or elsewhere? It's probably a good idea to check with the State Coastal Management Office to make sure your property will still be there in 10 years.

     But erosion isn't the only issue affecting owners of beachfront property. They also have to contend with hurricanes. Home insurance rates have doubled for many alongFlorida's oceanfront, according to the Florida Insurance Commission, and some carriers, including Allstate (NYSE:ALL), are no longer writing new policies along the FL-to-NY coast.

     What does this mean for the high-end sunseeker ? In addition to waterfront manses in areas such as Corona Del Mar, Southhampton NY, and Manhattan Beach FL, there are a number of luxury beachfront resort clubs catering to high net worth individuals who wish to be unencumbered with the costs associated with home ownership. Clubs such as Private Escapes offer part-time living in such locales as the Bahamas, Mexico, Florida, and the Virgin Islands, where vacationing owners can put insurance rates as far out of their minds as their 9-5 job.

     Just one more way to enjoy the sunshine. "