Photo Courtesy of Douglas Elliman Real EstateWhen it comes to auctions, its not just post-war paintings that are setting new records. The luxury end of the property market is positively booming in London, New York, Hong Kong and Dubai.
Back in December 2011, an unfurnished duplex in London’s Bulgari Hotel and Residences was purchased privately for approximately £100 million, as a second penthouse unit in the development was listed at £69 million pounds. Demand outstripped supply in both London and Manhattan, as the wealthy rushed back to invest in metropolitan hotspots.
More recently, records have been set in Hong Kong – where an apartment fetched $61 million – and Miami, where an island property overlooking the azure waters of Biscayne Bay sold for $47 million. In New York, a Manhattan penthouse was listed in late July with an asking price $100 million, following a slew of record-breaking trophy apartment sales in the city.
Rising demand for high quality property and stabilising prices have resulted in overseas buyers returning to Dubai to invest in real estate. According to figures from the Dubai Land Department, overseas investors spent over $6 billion on property in Dubai in the first half of 2012, led primarily by Indians, Pakistanis, Britons and Iranians.
For Indian buyers, investment in Dubai provides a refuge from currency depreciation as the Indian rupee continues to decline against the US dollar. For the Iranians the Emirate provides an investment safe haven, as international sanctions imposed over Tehran’s disputed nuclear programme continue to threaten the Iranian economy.
Dubai’s largest developer, Emaar Properties, has confirmed that revenue from apartment sales more than doubled in the second quarter offsetting a drop in sales of commercial units and villas. The developer of the world’s tallest tower, the Burj Khalifa, reported in July that its second-quarter profits had more than doubled, total revenue rose slightly to 2.1 billion dirhams from 2 billion dirhams.
Emaar’s performance was one of the best among property companies in Dubai as the sector recovers from a roughly 60 percent drop in real estate prices from their peak in 2008 (Reuters).
Property prices in Hong Kong have surged over the past few years due to record low interest rates and a flood of wealthy buyers from Mainland China (AFP). Yet the property market has experienced a slowdown in 2012, with sentiment hit by the Eurozone crisis and plans to boost public housing.
Despite the ease, a luxury unit at Opus Hong Kong, in the upmarket Peak residential area, has fetched a record breaking HK$470 million ($61 million), making it the priciest condominium ever sold in the Chinese city and potentially Asia’s most expensive apartment. The building was designed by the Pritzker Prize-winning architect Frank Gehry.
Speaking with AFP, Centaline research head Wong Leung-sing confirmed the new record price for any Hong Kong apartment, but added that the sale of the ultra luxury condo could not be used as a yardstick to gauge investors’ appetite for luxury apartments in the Asian financial hub.
London has become well known for some of the largest luxury property details in the world, garnering attention in 2010, when the then-unfinished penthouse at One Hyde Park sold for ?136.4 million, making it the most expensive property in Britain.
Despite global pessimism surrounding the Eurozone crisis, home prices in London’s most expensive areas have gained 49 percent since a March 2009 low point and are now 14 percent above the previous peak in 2008, according to broker Knight Frank (Bloomberg).
Sales of new luxury homes in 2011 reached ?2 billion pounds, according to residential property experts from EC Harris. The firm expects that such sales will reach ?10.2 billion pounds in 2016, when an additional 3,800 units are expected to be completed – more than seven times this year’s total of 500.
As demand from overseas encourages development outside the city’s traditional prime neighbourhoods, luxury-home builders plan to complete more than 15,000 houses and apartments in London over the next decade.
“A few decades ago, there were only a few mega apartments,” explained Faith Hope Consolo, chairwoman at Prudential Douglas Elliman, to Newsday. “Now, there is so much demand, it is becoming more of the norm than the exception.”
During a sweltering North American summer, three Manhattan apartments hit the market at prices of $95 million and $100 million. Following the sale of a penthouse in the Ritz Carlton for $70 million, and a penthouse at 15 Central Park West for $88 million earlier this year.
These stratospheric sales – thoroughly removed from the nationwide collapse in real estate prices – have left real estate professionals struggling to explain the surge (NYTimes). Though it has been suggested that the affluent are beginning to invest in iconic properties akin to investing in post-war and contemporary art, which is also setting record prices.
“When we call a property art, it tends to have architectural or historic significance,” revealed Kathleen Coumou, senior vice president at Christie’s International Real Estate, confirming to the NYTimes that some residential properties can legitimately be marketed and sold as art. She cited the recent sale of a Manhattan town house designed by the famed 19th-century architect Stanford White, listed by Christie’s at $49 million.
Though the analogy has been poorly received by the art world, the sentiment compliments the ‘Treasure Trend’, where affluent investors are said to be increasingly motivated by social value, heritage and enjoyment, over financial returns. Whatever the reasons, the wealthy are continuing to spend on luxury real estate at an unprecedented pace, but how long will this last?
Concerns are increasingly been raised as to the sustainability of this extravagant expenditure. Higher stamp duty is expected to deter luxury property buyers in London, and experts are concerned that the flood of luxury development in the UK capital could could result in a price crash due to massive oversupply.
In Hong Kong – which has the developed world’s highest housing costs and its widest wealth gap – the political landscape is changing. Billionaire property developers are under pressure’s from its new leadership, a reinvigorated anticorruption agency and local residents angered by rising rents and stagnant earnings (WSJ).