Wealthy competing for the very best property in key global cities

October 13, 2011 - London

Recessions and debt crises are largely not affecting the top end of the global property market with Christie's International Real Estate reporting that the world's wealthy are still buying luxury property and mostly paying cash to do so.

The organisation's International Luxury Residential Report, unveiled at its annual conference in London, shows that buyers' optimism is slowly increasing with more than 67% of its agents and affiliates reporting an increase in activity in the first eight months of 2011 when compared with the same period last year.

Scarcity of property is driving up prices especially in top cities such as London, Paris, Hong Kong, New York and Beverley Hills.

Top performing real estate sales are in those countries with an abundance of natural resources and favourable fiscal policies such as Brazil, Switzerland and Canada.

Cash continues to be the most popular means of payment, according to 87% of the affiliate network.

They point out that the very best property in the world's most desirable locations will sell whatever is happening in the world economy and property is still seen as a safe haven when stock markets and equities are more volatile.

Giles Hannah, director of sales for Europe, told Property Wire that he expects new price records to be set for London property in the coming months.

Because of the scarcity of really luxurious real estate in the capital he predicts that prices will soon exceed £6,000 per square feet.

‘Like a fine wine or an old master, an exceptional property is bought to be enjoyed and will always find a buyer. Scarcity is driving the market forward, there is only a finite number of properties at this end of the market,' he said.

Money is not a problem for the wealthy competing for the top properties around the world. ‘Many already have three, four or even five homes. It is creating a two tier market in London,' added Hannah. Top buyers are from Russia, China and the Middle East, he added.

Scarcity is also driving the market forward in Paris. Charles-Marie Jottras of Daniel Féau Conseil Immobilier said that building regulations mean that new luxury properties are unlikely to be built in the French capital, there is intense competition when they come on the market.

‘Planning laws mean that nay new buildings must have a percentage of affordable housing included and that is just not going to happen at the high end,' he explained.

He added that wealthy buyers are getting younger and want contemporary homes. That means that those that have been renovated will realise top prices.

Neil Palmer, chief executive officer of Christie's International Real Estate, confirmed that the challenge in the luxury market is a lack of quality properties.

‘At the very top of the market, above US$10 million in some markets and above US$5 million in others, sales are primarily cash transactions.

A largely discretionary buy of a second, third or even tenth home, these purchases are driven by an unique dynamic.

Location, lifestyle and sentiment are equally important as value and in some cases even more so,' he explained.

But even in the luxury market lending is proving difficult and this is slowing sales. ‘Properties prices at US$1 million to US$5 million are typically purchased as primary residences by those still in the workforce. These buyers require some financing.

Lending remains challenging in many traditional markets with aversion to risk continuing to dominate the headlines. Consequently, this lengthens the amount of time it takes to sell these homes,' he added.

This article has been republished from Propertywire

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