Posts Tagged ‘London’
Sunday, February 10th, 2013
Posted by Leonard Steinberg on February 10th, 2013
Just when you thought real estate prices could not go higher in New York, we hear of real estate pricing estimates in London, a city that already makes New York seem like a bargain…. now news comes that the average price of a London home will climb at least 31 percent by the end of the decade, according to a forecast by the Center for Economics and Business Research.
Price appreciation will be driven by the British capital’s ties to fast-growing emerging markets, a “high concentration” of service firms and an economy that isn’t reliant on government spending, the London-based research group said in a statement yesterday. Other cities will experience slower growth due to cuts in government spending, the company said. High rates of immigration to the capital bring a range of skills, languages and international commercial links which are forecast to fuel London’s economic and house-price growth.
London and New York share a lot in common as they are GLOBAL CITIES, the type of city that draws industry and investment from around the globe. Both cities are perfectly positioned for robust growth, unlike many smaller cities. They have their own mini-economies, semi-separated from the countries they exist in and the world’s great talent continues to be drawn to these global centers, further fueling the demand for high end real estate.
Saturday, September 22nd, 2012
Posted by Leonard Steinberg on September 22nd, 2012
Is BRICFLATION upon us? In this morning’s Financial Times a story addresses a potential pricing bubble in the Central London new construction real estate market, where it was identified that just under 20% of the buyers are UK citizens and the majority buyer pool are foreign, mostly from the far east. With growth slowing in these countries, is there a pricing bubble at play?
New York has been aflutter with talk of ‘all the foreign buyers’, and indeed they have become a sizeable force: Are they artificially boosting pricing here too? What is the percentage of foreign buyers? 5%? 10%, 25%? Data is showing that the vast majority of buyers are indeed domestic, although at many of the brand new buildings (and there are not that many……yet) a good chunk of the buyers have indeed come from BRIC countries. Is this demand pushing pricing up beyond reality? New York pricing is still comparatively cheap next to London. In Miami a huge pool of foreign buyers has helped a recovery, especially in prime new buildings.
Only time will tell in Manhattan how much of the coming construction boom will be bought up by local or foreign buyers: And will BRICFLATION be a concern in the coming months and years. One 57 certainly has a large chunk of foreign buyers, but that is a mere sliver of the market…..when those units close in 2013, watch out for those prices boosting averages artificially for sure.
Friday, April 6th, 2012
Posted by Leonard Steinberg on April 6th, 2012
New York City rates as the 17th most expensive real estate city in the world: maybe another reason why Manhattan is so incredibly popular with international investors these days? Monaco is at the top: a strong message about super low taxes for the super-wealthy? The rich always buy low….. Here is the list of the Top 10:
LOCATION – AVERAGE PRICE PER SQUARE FOOT
Monaco – $5,408
Cap Ferrat — $4,800
London — $4,534
Hong Kong (houses) — $4,406
Courcheval 1850 — $4,081
St. Moritz — $3,951
Gstaad — $3,701
St. Tropez — $3,600
Geneva – $2,959
Hong Kong (apartments) — $2,625
Wednesday, February 15th, 2012
Posted by Leonard Steinberg on February 15th, 2012
New York is the 47th most expensive city in the world…huh? Zurich took over from Tokyo as the world’s most expensive city to live in: that is what the Economist Intelligence Unit’s most recent world-wide cost-of-living survey says, even though it is somewhat difficult to believe. Of course the survey does not include real estate prices, but it may be one of the many reasons why New York real estate sales are so brisk these days with global buyers…..
After a trip to London, Tokyo or Zurich one cerainly feels richer going out to dinner, filling up a tank of gas or shopping for clothes in New York. So maybe its time for all us New Yorkers to stop whining about how expensive our city is…..the list says we are even cheaper than Los Angeles!
Sunday, February 12th, 2012
Posted by Leonard Steinberg on February 12th, 2012
I just read an article in the New York Times that confirms domestic First Class on airlines is just a slightly bigger, wider version of the horrific Coach class airlines offer to fliers, regardless that they are spending triple or more for their seat. In fact, the perks for flying first class have shrunken more and more as each year goes by. I see the same trend happening in the new buildings coming to Manhattan.
It used to be that delivering a doorman with a nice lobby, a workout room/gym and a kitchen with a Sub Zero fridge, Viking oven and granite counters qualified as first class luxury real estate in New York: That has changed rather dramatically, and will change even further going forward. I am fortunate in that I see many of the plans for new buildings well before they come to market. And with many developers focusing their attention on the MEGALUXE market (a term we coined in Luxuryletter), the flying equivalent of the private jet commuter, a doorman and fancy kitchen are the expected basics. Now with a more educated and demanding buyer who has been seduced and spoiled internationally not only by very super-luxe residential buildings, but also some exceptional hotels, the bar has been raised even further.
The MEGALUXE building has to deliver on many levels. It has to develop a very prolific personality, with something exceptional about its entirety. Strong ceiling heights, views, solid windows, superior finishes throughout are expected. Beyond that, systems have to be discretely installed. In fact, everything has to be installed with a level of quality that New York is not accustomed to. If I hear a London-based or Beijing-based buyer say it one more time, I could lose my mind: quite frankly, they are appalled by the quality of craftsmanship in the majority of new buildings….APPALLED! Yes, this is not your first class cabin flyer……they are used to the customized cabin of a Gulfstream. Often their interior designers have designed the interiors of their jets as well as their homes, and they demand a consistency. Developers in Manhattan have not yet catered to this buyer properly: Candy & Candy of One Hyde Park have certainly done so, even though I find their taste level very Nouveau-BRIC-chic….if you know what I mean. One Fifty Seven, the new condominium/Park Hyatt hotel tower on 57th Street epitomizes New York’s version of this market.
A nice gym is not good enough: a gym has to cater to the hyper-demands of a client who has a personal trainer commissioned to deliver their subject with an Olympic athlete’s body. The gym has to adjust to the changing styles of workouts. Personally I cannot think of a high end client who wants to share their gym with hotel guests, although in some of these new buildings they will be forced to do so. Hotels have been exceptionally demanding on condominiums in the conveniences they deliver…..and the MEGA CLASS has become spoiled. Finding a balance between home and hotel will be tough, although maybe a good chunk of this new wealth from BRIC countries knows no other life.
I personally believe the MEGA CLASS will demand security and privacy more than ever, although the trend to wealthy-display-discretion appears to be fading.
This MEGA CLASS of building will set new pricing records everywhere, and unfortunately if it is not separated from the commercial/coach/business/first-class-traveller-style real estate, it will distort pricing across the board. For those not eager for this extreme of lifestyle, the savings will be large. It will be important for all to recognize the vast difference in these buildings and understand that their value will be driven mostly by scarcity. Just like domestic first class, take a closer look at that pillow: if it’s not significantly better than the pillow in coach…..
Saturday, June 4th, 2011
Posted by Leonard Steinberg on June 4th, 2011
A dislocation between a few “super cities” is emerging, where international money moves markets, and national counterparts that are still closely linked to economic inertia. In to-day’s Financial Times it is reported that a separation has become marked over the past two years, with strong price growth in some major capitals belying modest gains or stagnation elsewhere within their countries. SUPER CITIES now merit comparison with each other rather than to their countries. This is particularly true when analyzing the upper ends of the property market, with buyers as happy to live in any one, and often in more than one, of the narrow sub-market of functioning city states. Manhattan is a prime example, defying the trends of the rest of the USA where this week sensationalist headlines spoke of a potential ‘double dip’ in the housing market. A school such as AVENUES, the world school is catering to this exact trend.
We are seeing a virtual global continent where billionaires move markets. The next property cycle has already started, and is seeing the emergence of a top tier of global city markets where the top addresses will become ever more fought over by wealthy buyers as stores of value and secure investments. We are seeing this in buildings such as 15 Central Park West, 40 Mercer Street, 200 Eleventh Avenue and 400 West 12th Street. Sluggish economic growth, along with the expiry of the stimulus packages designed to save western economies from recession, has slowed many housing markets in the past year – while some never really recovered from the crash in 2008. Crucially, the difference between the best and the worst markets generally comes down to a simple case of over-supply during the property boom. In Florida too great a percentage of the newly built inventory was built for pure speculation or vacation homes. A third of Spain’s housing market are vacation homes. Las Vegas’ huge speculative inventory is another example.
Tight supply constraints have met surprisingly resilient demand in international financial capitals such as Manhattan and an expanding wealthy population, which has helped accelerate this decoupling effect from national markets. All the factors sapping national housing markets – a malfunctioning mortgage market, the end of the quantitative easing programme that helped pump equity into economies, rising interest rates and unemployment – have less of an impact on prime cities where equity-rich overseas investors and domestic professional services are key. Lets face it, when HOME DEPOT fires 4 check-out employees per store during a recession and replaces them with self check-out machines, those jobs never return (2,200+ stores x 4employees = almost 9,000 jobs lost forever)….but those profits go to the bottom line that fuels the wealth of the company’s shareholders, the buyers of high end real estate. Those who lose their jobs cannot replace them and suffer, and so too does the real estate market that caters to them.
In the first quarter of 2010, according to Knight Frank, average annual price growth across these four cities stood at 54.6 per cent, but had fallen to 11.5 per cent by the first quarter of 2011. Knight Frank’s overall prime city index saw a decline in the past year because of cooling Asian prices, with the average annual price growth of 6.6 per cent across all cities in the first quarter about half what it was in the same period of the previous year. While most major cities saw growth over the year, some such as New York, Moscow and Singapore have been weaker in recent months. Transactions in Asia have slowed as speculators retreat following the Japanese crisis and rising local mortgage rates. In China, the volume of primary residential sales in most of the 10 major mainland cities fell between January and February 2011 owing to new government regulatory policies. In an effort to
curb speculation in Hong Kong, the government has launched a mortgage database that may mean that banks refuse more applications from investors. There has also been some slowdown in other, more mature, prime locations, with the risk of future tax changes in Switzerland slowing growth, for example.
The strength of Hong Kong’s market has been driven by Chinese mainland investors looking for a safe haven for their emerging wealth. Prices were higher by some 80 per cent from the low point of 2008 by the end of last year. There is also a link between Chinese wealth and London or Paris, as Asian residents look for a base in Europe, and investors look for a safe haven to invest in mature and high-performing markets. There is an “insatiable demand” from investors in Asia and the Middle East for prime property to act as a store of wealth, with London top of the list followed by Paris and New York….Manhattan is also seeing a strong demand from South America. All of this is very understandable considering the profiles of the governments of these countries.
Foreign nationals accounted for 60 per cent of all buyers in the prime central London market, according to Savills, and 70 per cent of houses valued at more than £10m in 2010. Moreover, prime housing in London has a correlation with the price of gold and equities as much as any underlying national economic outlook, as house price growth is stoked by the growth in the wealth of the world’s richest people.
It is already possible to spot the correlation between the oil prices and the value of real estate in Moscow. An increase in the price of oil by $1 per barrel triggers an increase in the price of a square metre of prime Moscow real estate by $200, according to Savills. When global demand for energy resources dropped off in 2008 and 2009, the value of properties fell by around 40 per cent from the 2007 peak. The average price of real estate in Moscow was $5,700 per sq m in the first quarter of this year – more than three times the Russian average – even if the end of the rebound has meant some price declines over the past year.
Moscow is to Russia and Manhattan is to the USA what London is to the rest of the world, given the significant influx of buyers from the rest of the country seeking real estate as an investment. However, as wealthy Russians feel even wealthier with the increase of both their business and housing interests, they are also turning to the south of France and luxe resort locations in Italy. Home owners in Monaco could do as well looking at the price of gold or oil as at the economic growth of the principality. Bicycle-riding locals in Forte Dei Marmi decry the invasion of chauffer driven Maybach’s shuttling Russian trophy wives to the local Prada store.
Compared with provincial cities, the bigger, more international cities have seen bigger rises in housing prices, especially over a five-year period. London prices rose 26 per cent, against a national average of 6 per cent; Hong Kong by 95 per cent, against a Chinese market growth of 59 per cent, and a flat market in New York against a 26 per cent decline around the rest of the US. Some buildings in Manhattan have seen distinct pricing escalations in the past 2 years, and even in the past month some pricing records have been broken.
There is a widening divergence between key cities and their domestic markets based on this supply and demand imbalance. This is particularly true of prime property in Paris, London, Manhattan, Zurich, Geneva, Hong Kong and Helsinki. The top end of these markets appeal to global buyers as much as to domestic wealth, which means that their prices are capped not by national factors but by global trends. Those markets do not necessarily move as one but are aligned on a similar curve.
Nationality does play a part when it comes to currency, particularly where people are buying properties more as investments than as places to live. Pricing in London has been boosted by an additional currency advantage, given the value of sterling – something that has held back the Manhattan and wider US prime market. Overseas buyers account for only 15 per cent of the prime market in Manhattan, for example, and this is in part why it has not seen the same sort of growth as in the UK, yet the influx of the international super-wealthy seems to be growing.
Wealthy cities are not immune to the global economy and there are risks from any economic shock and fall in stock markets or commodities. There have been some falls already as houses have come off their rebound highs and reacted to localised events such as the earthquake in Japan. The financial troubles in Greece, Portugal and Spain weigh heavily on European centers.
The decoupling effect appears to be true as long as the upper levels of the international wealthy remain so. Even cash-rich investors like to use debt where possible, and the mortgage constraints and interest rate rises remain a broad impediment to housing growth. There are specific dangers in the sovereign debt in the west as well as the potential for deflation following a housing bubble in the east.
All these factors have subdued growth, rather than reversed it, and fundamentally strong demand will continue to lift prices. It is predicted that the $15,000 per sq ft barrier will be breached at some point this decade, having reached $9,000 per sq ft last year in London and Hong Kong. Manhattan’s record is closer to $ 7,000/sf, although that is an unusual number, the average being much lower. This bodes well for Manhattan where the highest end of real estate could be viewed globally as a ‘good buy’. The “virtual continent” of the wealthy is unlikely to falter too much: The creation of wealth in emerging markets over the next decade will ensure that they grow – regardless of domestic market conditions.
Manhattan is getting ready to launch some super-luxe buildings over the next few months catering specifically to this market including The Drake building on Park Avenue, One 57, the Extell building on West 57th Street, and 150 Charles in Greenwich Village. The performance of these buildings will be the next test for a market that has a short supply of full service ultra-luxe exclusive buildings.
Sunday, October 31st, 2010
In CRAINS, a report shows how New York City is unlike the rest of the USA, and is truly an international city.
These days, buyers of commercial property in New York can expect their investments to provide similar rates of return as they would in London, Paris and Washington D.C.—cities RCA calls the “Fabulous Four.”
Capitalization rates, the yields investors receive from investing in commercial properties, are more in parity among these four markets than with their respective regions.
Over the past year, yields on prime properties in New York and Washington have averaged a mere 50 basis points, or 0.5%, above those of London and Paris. But they have ranged from 50 to 300 basis points—0.5% to 3.0%—below the average yield in the U.S. as a whole, where prices are significantly lower. Similarly, those in London and Paris have been on average as many as 200 basis points below the average office yield in Western Europe.
One of the main reasons is the strong interest from cross-border buyers, who represent a large share of acquisitions in each of these four cities and help keep prices aligned within these global markets. Foreign buyers account for more than half of office transactions in London and Paris, and a quarter of transactions in New York and Washington.
“A buyer can jump from New York to Paris very quickly,” said Dan Fasulo, head of global research at Real Capital Analytics. “It’s the same buyers, the same debt providers.”
This isn’t a new phenomenon, but it has regained momentum since the recent slump. Mr. Fasulo said that it has been a macroeconomic trend for close to a decade but was put on hold during the global economic downturn in late 2008 and early 2009.
And what does this mean for residential real estate? “When there is money to be made in New York City,” says Leonard Steinberg of Prudential Douglas Elliman and publisher of Luxuryletter, “the wealthy are there. That bodes well for our City.”
Friday, August 13th, 2010
And you thought New York was expensive? Think again. A six-bedroom, two-floor penthouse in the One Hyde Park development in Knightsbridge, London has sold for £140 million — equivalent to around $220 million — making it the world’s highest priced apartment sale, according to THE REAL DEAL. The buyer, who remains anonymous, will enjoy views of the London skyline, private wine tasting facilities and top security features which include bullet-proof windows and a panic room. The property also has tunnel access to the Mandarin Oriental Hotel and its 24-hour room service. One Hyde Park was designed by Sir Richard Rogers’ architectural firm Rogers Stirk Harbour. In 2004, the site was acquired by developers Nick and Christian Candy for £150 million, or close to $235 million. The recent sale dwarfs the previous purchase price record for Britain held by an apartment in Westminster’s 8 St. James’ Square, which sold for £115 million — or $180 million — in 2008.
In Manhattan, the most expensive residential property listed is a townhouse on the Upper East Side at 1016 Madison Avenue, listed for $ 72 million, about one third of the cost of the One Hyde Park penthouse. “It is not surprising that New York attracts so many foreign buyers: the value on the very high end for an international city is actually strong, and the supply is very limited”, says Leonard Steinberg a managing director of Prudential Douglas Elliman. “This sale is explained by the lack of super-secure, full service new construction buildings in a prime location. The pound is weak right now, so a perfect opportunity for a foreign buyer to step in.”
The most expensive home in the United States is the Manor in Holmby Hills, Calif., a $150 million, 56,500-square-foot mansion owned by Aaron Spelling’s widow, Candy, according to Overseas Property Mall. The 4.6-acre California property features a library, gym, bowling alley, wine cellar, gift-wrapping room and media room. The grounds have pools, gardens, a waterfall, and parking for over 100 cars.
So does One Hyde Park have a gift wrapping room?