Fol­low the money

Lon­don, Monaco and Man­hat­tan re­main on buy­ing lists of su­per-rich

Finweek English Edition - - Property - JOAN MULLER

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.”

Source: Knight Frank, Septem­ber 2008

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