Wealthy Buyers Driving Prices

real-estateMore good news for Sellers according to the Wall Street Journal. The “Superrich” drove home prices even further up in 2013.  More importantly, Los Angeles was the ONLY North American city to make the list of the top 15.


Estate agents, rejoice. The rich are getting richer and more confident, and there is nothing they like more than buying fancy homes.
New data from a global study of “ultra-high-net-worth individuals”–the top 0.01%–shows a stark rise in house prices in the most desirable parts of cities across the world.
The study, by real-estate broker Knight Frank, looked at the lifestyles of the superrich–those with more than $30 million in net assets–and the very expensive penthouses, castles, mansions and estates they buy.
Prices in prime locations rose last year in 54 of the 90 cities surveyed by Knight Frank. That’s a greater proportion of gainers than in the prior year’s survey, when half the cities showed rises.
The data suggest that the rich are spreading their wings, after years of retreating to a relatively small number of stable cities. When the banking crisis kicked off in 2008, a “big wave of money” flocked to investing in cities like London, New York, Sydney, and Vancouver, said Liam Bailey, global head of residential research at Knight Frank in London.
That wave is spreading out. Six of the 10 cities with the biggest average price gains in Knight Frank’s Prime International Residential Index were in the Asian-Pacific region this year. Jakarta, Indonesia, was on top with a 38% gain.

Los Angeles was the only North American city in the top 15, posting a 14% rise.
While Europe continued to slump–the region lost 1% and contributed to 80% of all locations where prices declined last year –there were signs of recovery. Dublin captured the fifth spot on the index with a 17% gain, and Madrid posted an increase of 5%.
The ranks of the superrich appear to be growing. The study estimates that there were around 168,000 people who met the $30 million threshold last year, close to 5,000 more than in 2012. Their wealth totaled $20.1 trillion.
And they like property. Houses account for 30% of their combined wealth. On average, each of the superrich has 2.4 homes, the survey said.
Demand for mansions and penthouses across the world spread out from traditional havens like London and New York last year. While caution among the superrich–invoked by the half-decade-long financial crisis–continued to ease, their money continued to grow.
Alongside the uptick in wealth creation, confidence in the economic recovery lead investors to branch out from traditional havens, especially benefiting Asia. But not all markets in the region were strong. In Singapore and Hong Kong, governments moved to cool superhot markets.
Tighter lending regulation in Singapore and a stricter tax regime in Hong Kong “really slowed the markets down” in 2013, said Nicholas Holt, head of research, Asia-Pacific, at Knight Frank.
But the havens haven’t lost their luster. Despite not showing huge price growth at the upper reaches, Monaco, Hong Kong, London, Singapore, Geneva and New York remain among the world’s highest-priced luxury-home markets.
In those cities, homes in the most desirable districts are phenomenally expensive. In Monaco’s top-tier residences, $1 million buys enough square footage for a bathroom. In London, it fetches a large dining room. For New York, it’s a large reception room.
“You might think that if risk appetite has returned, it would undermine the safe haven story,” Mr. Bailey said. “But no. Those prices are still rising.”