London and Hong Kong make headlines for mind-boggling prices paid for homes these days, but don't count out New York City.
Q&A: Big Apple property prices.
Last Updated: May 20, 2011
Why are New York apartments attracting these ridiculous prices? Top units are a rarity and there are still a lot of rich people in the Big Apple. Historic properties are particularly prized.
I heard that "regular people" can't buy in some buildings? Many of the older buildings in Manhattan are organised as co-ops and buyers are carefully reviewed. The co-op boards wield tremendous power to decide who gets to live in the building. Rock stars and actors often don't make the cut – too nouveau riche. And that just adds to the status and prestige of owning in certain buildings.
I thought US property is still depressed? In many markets prices are still going down, especially where thousands of foreclosed and distressed properties are hitting the market. But in prime markets such as New York and Washington DC there are still buyers and prices have not fallen nearly as much.
Is New York like London where they are all international buyers? There is definitely an international influence. New York is one of the finance capitals of the world. Russian, Asian and Latin American buyers play a key role. But it's not nearly as noticeable as London, where more than 50 per cent of the most expensive homes are bought by overseas citizens. In New York it's more like 20 per cent.
The latest big bite out of the Big Apple was the US$48 million (Dh176.3m) paid for a five-storey, 10 metre-wide mansion, described as a "roomy" 1,100 square metres. The buyer was Johnson & Johnson heiress Libet Johnson, who is reportedly moving up from a four-bedroom apartment in the Trump International Hotel and Tower that she listed for $24m last month.
Her new home dates to 1881 and was once owned by Alice Gwynne Vanderbilt of the famous New York Vanderbilts. The sellers, who reportedly paid $11.5m for the mansion in 2001, initially put the house on the market in 2007 with an asking price of $62m, which, it turns out, was a tad unrealistic.
There's nothing shabby about the $48m price tag, but it is far from the record price paid for a townhouse in New York. That is believed to be the $53m paid in the heady days of 2006 by the investment banker J Christopher Flowers for the Harkness Mansion, a "neo-French Renaissance" townhouse built in 1896.
But the Vanderbilt sale is one more sign the wealthy are once again ready to open their wallets for New York property.
The Vanderbilt mansion deal follows on the heels of the March sale of a 560-sq-metre condominium in the refurbished Plaza Hotel for $48m to Igor Krutoy, the Russian composer. The price is believed to be the highest for a condominium in the city.
But that record may be about to fall. Two adjoining duplex apartments on Park Avenue owned by Courtney Sale Ross, widow of the media mogul Steve Ross, recently went on the market for $60m. Past residents in the building include John D Rockefeller, Vera Wang and Jacqueline Kennedy Onassis, who lived there as a child, according to The Wall Street Journal.
Top 5: Most expensive homes for sale in US
1 Spelling Manor, Los Angeles, US$150m (Dh550.9m).
2 Tranquility, Zephyr Cove, Nevada, $100m.
3 Frank Woolworth Estate, Manhattan, $90m.
4 Versailles, Windermere, Florida,$75m.
5 Madison Ave. Townhouse, Manhattan, $72m.
But the highest New York prices do not match London, where Ukrainian businessman Rinat Akhmetov recently paid £136m (Dh806.1m) for a penthouse apartment at One Hyde Park.
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COMPANY%20PROFILE%20
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COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
If you go
Where to stay: Courtyard by Marriott Titusville Kennedy Space Centre has unparalleled views of the Indian River. Alligators can be spotted from hotel room balconies, as can several rocket launch sites. The hotel also boasts cool space-themed decor.
When to go: Florida is best experienced during the winter months, from November to May, before the humidity kicks in.
How to get there: Emirates currently flies from Dubai to Orlando five times a week.
Key facilities
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- 600-seat auditorium
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- Disruption Lab and Research Centre for developing entrepreneurial skills
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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