Follow the money
London, Monaco and Manhattan remain on buying lists of super-rich
MONEY CONTINUES TO FLOW to holiday homes and investment properties in prime hot spots worldwide despite the turmoil in financial markets and a slowing global economy. A report released last week by UK property group Knight Frank shows that the very top end of the global housing market – super wealthy areas with price tags that typically exceed R80m – have generally been far more resilient to the worldwide credit crunch than the market’s cheaper end.
In fact, a number of the top 20 most expensive housing markets were still recording double-digit price growth in second quarter 2008 (see table). That’s in stark contrast to the pronounced slump already evident in many middle-income property markets worldwide.
The latest Knight Frank prime international residential index shows Dubai is now the world’s fastest growing housing market, with prime property prices still racing ahead at 52,6% in second quarter 2008 (year-onyear).
Monaco recently overtook London as the world’s most expensive place in which to buy a posh residential address. The average topend buyer now has to fork out a whopping €51 000/sq m (R612 000/sq m) for a luxury pad in Monaco.
Knight Frank’s latest figures on prime property prices again confirm just how undervalued SA property is in international terms. SA’s prime beach-belt areas, such as Bantry Bay and Clifton on the Atlantic Seaboard, currently command between R70 000/sq m and R90 000/sq m – less than 25% of what investors would pay for a property of the same quality on the French Côte d’Azur, in New York or London.
The highest price achieved to date in SA for a residential property – the recent R110m sale of the penthouse suite at Sol Kerzner’s new One & Only hotel under construction at Cape Town’s V&A Waterfront – is also still way below that of other international hot spots. The One & Only sale translates into a rand/sq m price of “only” R112 000.
Liam Bailey, head of residential research at Knight Frank, says both Monaco and London are still vying for the top spot in the global housing market stakes. He notes the prime market in London has taken a hit from the credit crunch fallout, recently slipping to second position behind Monaco.
But although average London prices have slipped, new building and refurbished properties in its prime suburbs apparently continue to break new price records. Interestingly, Manhattan – which Bailey regards as the only other true global super-prime market besides London and Monaco – is also bucking the overall trend in the United States.
Whereas prices in the US are still falling, prices for prime Manhattan properties rose 12,3% in the year to June. However, Bailey notes indications are that the Manhattan property market has weakened through the third quarter.
Key question is why the super wealthy sector of the housing market worldwide remains so strong despite ongoing credit woes. Bailey maintains that’s probably due to the extraordinary wealth creation that’s happened in the global oil and commodity sectors.
However, Bailey says if the financial markets continue to take a turn for the worse, the performance of prime property markets will no doubt be dragged down over the next 12 months. He says recent falls in energy and commodity prices worldwide also point towards a weakening in wealth generation from both those sectors.
But Bailey isn’t convinced the super-prime end of the global housing market is yet near or at its peak. “Demand isn’t going to evaporate and wealth creation and accumulation in emerging economies and high-end services sector activities will continue. As such, the flight to quality in terms of both location and product we’ve seen over recent years will remain a constant.”