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Luxury Property Demand Outstrips Supply in London & Manhattan

Nov. 29th, 2011 | Comments 1 | Make a Comment   
Located on a Penthouse floor in the Time Warner Center, this Manhattan property is listed with Sotheby’s for $60 million

A “herd-like mentality” is said to have spurred luxury property buyers in the past several quarters, as the wealthy once again enthusiastically invest in hotspots like London and Manhattan. Despite forecasted economic storms and the liberal use of the words ‘debt’ and ‘crisis’, both locations are currently enjoying such a boom at the high end of the market, that demand has outstripped supply.

According to real-estate broker Savills Plc, the number of London houses and apartments that sold for more than 5 million pounds rose 31 percent to 262 in the nine months through September. Over in Manhattan, the supply of apartments for sale over 5 million dollars, reached the lowest level for an October since 2007. As Shari Scharfer-Rollins, SVP at the Corcoran Group brokerage puts it: “Inventory is down and demand is up."

Christie’s recent State of the International Luxury Market report suggested that scarcity of property was driving up luxury real estate prices, particularly in top cities such as London, Paris, Hong Kong, New York and Beverley Hills. The report also went on to muse that sellers worldwide have adapted to a new reality in luxury housing and are beginning to accept that their residence is not going to command the same price that it might have in 2007.

Resultantly, market activity and optimism increased throughout 2011. Christie’s went so far as to identify ‘a lack of quality housing inventory’ as the biggest challenge markets were to face in the coming months. A sentiment this week echoed by Jason Haber, CEO of New York real estate broker Rubicon.

Speaking with Bloomberg, Mr. Haber revealed that his agents were now cold-mailing townhouse owners around New York City, to see if anyone might consider selling. “That’s not something you would do if the market was flush with high-end inventory,” he said of the strategy. “That’s a sign of the times. This is a ready, willing and able buyer and we can’t find the product for him.”

In London – albeit for varying reasons – luxury homebuyers are having similar troubles. The locals especially, following news that of the number of London houses and apartments that sold for more than 5 million pounds, overseas buyers comprised 65 percent. Knight Frank identified wealthy southern Europeans as buyers of properties worth at least 1 million pounds in London’s well to do Chelsea and South Kensington, generally as pure investments, second homes, or accommodation for children studying at university.

Investments identified as particularly timely by Philip Beresford, compiler of London’s Estates Gazette Rich list. “London is doing well on the back of the luxury market as the world’s billionaires flood in, either as investors in the property market or buyers of top end properties as bolt holes in these very uncertain times,” he revealed to Reuters.

Particular interest has been noted from Italy, Greece and Spain, where the wealthy are said to be attracted by the security and stability of the London property market, as well as liquidity and well-kept property registers. “We’ve got Italian and Greek buyers who have confirmed that view … They want to have money in a safe haven, preferably not a bank, or stocks because it is too volatile,” remarked Nick Candy, development manager and designer of One Hyde Park.

The 1 billion pound development is home to apartments ranging from £7 – £136 million pounds each, which are according to Mr. Candy, attracting interest from buyers currently experiencing instability in home markets. “We have a lot of viewings going on from any country that has got economic or political turmoil,” he told Reuters.

And then there is the issue of currency. Property agency Knight Frank recently revealed research suggesting that Chinese buyers benefited from a 24 percent purchasing power discount based on the Yuan-sterling forex rate between the peak of the prime London housing market in March 2008 and October 2011.

Chinese luxury home buyers were said to be leading a legion of “cash-rich non-UK investors” in search of upmarket London homes, with demand driven by currency exchange rates that produce discounts of up to a quarter on purchase prices. A similar tale unfolds across the pond in Manhattan, as Ms. Scharfer-Rollins confirms: “The dollar is weak and I think foreign buyers find that they can get more in New York City as an investment than they used to be able to.”
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