With many more wealthier people and not enough properties, prices at the high end have been rising fast
Jon Gorvett
While fallout from the US subprime mortgage crisis is wobbling many housing markets, at the top of the property scale it seems the world’s big spenders have been blissfully unaffected. When it comes to luxury, residential real estate has never had it so good.
“The market for high-end residential real estate is very, very strong at the moment,” said Dan Walsh, a group consultant with Grosvenor, an international property development and fund management company in London. “Although I expect some moderation in the next six months, in London, in China and all across Asia you are seeing the market responding to the enormous accumulation of wealth that is going on—and this is a phenomenon that is not going away.”
Russian oil and natural gas billionaires, Chinese and Indian entrepreneurs, and an army of financial intermediaries constitute this growing class of high-end buyers, said Liam Bailey, head of residential research for the Knight Frank real estate agency in London. Bailey’s annual wealth report for 2007 shows that although the price of luxury homes has never been higher, demand for them has been surging.
“The number of high-end properties tends to be slightly more static than the number of people who want them,” Bailey said. “Wealthier people end up chasing properties then, with the price, therefore, rising faster at the high end” than in the middle range and at the lower end, he said.
“In 2006, prices for the most expensive global property went up around 14% on average, while the housing market overall went up around 9%. That gap has continued this year, too.”
One of the main locations where this is happening is London, which Walsh described as being “in a class of its own.”
“You are seeing record prices for prime Central London property these days,” said Jim Ward, research director for the Savills real estate agency in London.
“In the last 12 months there has been 29% price growth for this class of residential real estate in the capital. For this, the £5,000 (Rs4 lakh) per sq. ft barrier has also now been breached.”
One project that illustrates the overall trend is One Hyde Park, an 80-apartment address designed by the architect Richard Rogers and being built in the Knightsbridge part of the city. Earlier this year, some of its best units were expected to sell for £4,000, or $8,060, per sq. ft—but expectations have risen since then. |
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