London Prices set to fall by 14% in 2009

A recent report by Savills, a real estate adviser states that London’s luxury property market is expected to devalue by another 14% next year and that the total decline over the two-year period 2008-2009 may be 30%. This is slighly more pessimistic than their April report, which suggested a decline of 25%.

The report also states that prices for properties costing in excess of £1 million are likely to fall at a faster rate - 20% this year, because of reductions in demand from people employed in the financial services sector. The center for Economics and Business Research stated that London may lose as many as 62,000 jobs in the financial sector, which has long been the driving force behind London’s luxury real estate, along with a reduction in bonuses of 60% or £3.6 billion.

We’re not expecting any bonus money to go into the market this year and next. Any recovery is not going to be fueled by the central financial hub. Lucian Cook, Savills.

Prices in the “Super prime” market have also fallen around 20-25%, despite the falling value of the pound.

The report also suggests that London will be the first British market to recover, but this was unlikley to start happening until 2010, probably later for the rest of the country.

Savills

As usual, the news regarding the condition of the luxury real estate market appears at odds with many statements coming from the real estate agencies.

At a recent luxury real estate auction in Fort Lauderdale, Florida, properties were quickly taken off the block after receiving no bids. One penthouse condominium in Williams Island for example, was previously listed for $5.6 million, went on the block for $5million, was dropped to $2.5 million and immediately withdrawn.

Those properties that did sell, invariably sold for much less than previously offered. Two bay-front properties on Venetian Islands sold for $500,000 and $1 million – the last time they changed hands, back in 2005, the same properties sold for $2 million and $2.75 million respectively.

Yet at the same time, The Star quotes SKY Sotheby’s president Chad Roffers as saying: “The high end is resilient. Certainly the market has corrected since the peak of 2005. What we are seeing is that quality waterfront inventory is holding value." Which rather contradicts the prices achieved.

Unsurprisingly, many of the sales went to foreign buyers.

In London, much the same story unfolds. Prices realized and analysts opinion are in sharp contrast to the real estate agents opinions.

Savills are predicting that the amount of money available to invest in high-end properties will fall by as much as 65% this year. This thanks to smaller bonuses in the city as the banks start to feel the effects of mortgage write-downs in the USA sub prime market. Traditionally, London’s luxury property market has relied heavily on bonus laden financial brokers propping prices up.

Having said that, Knight Frank claims to have sold 40 of the 80 available apartments in the One Hyde Park development. Once again, the bulk of the sales were to foreign buyers – of the 40 sold so far, 13 were to Russian buyers, 10 to Middle eastern and just 8 to British buyers. One would have expected them all to have sold by now in a strong market, but the average sale price is around £20 million.

Donald Trump hit the news recently also. A recent press release from "Ultimate Homes," said:  Donald Trump’s  much-publicized Palm Beach mansion has a new price: $100 million. Along with the $25 million price reduction, Trump also turned the listing over to Lawrence Moens, a Palm Beach broker who has a reputation as a low-key but highly effective dealmaker.

When it debuted on the market in 2006, the estate’s $125 million price tag made it the most expensive property for sale in America and generated a great deal of attention. It took the No. 1 spot in that year’s edition of Ultimate Homes, and, most importantly, it was one of the first, if not the first, to break the $100 million price point.

While the media always has focused on price, what makes this estate so important, according to Moens, are the 6.75 acres and almost 500 feet of unobstructed oceanfront. Also significant is the location itself, which he describes as “prime, one of the most desirable places on the Eastern seaboard.”

Another change, according to Moens, is the potential that the property could be sold as two separate parcels or a single compound.

The price change means Trump’s estate is no longer one of the five most expensive residential listings in the country, although it is still in the top 10. Unique Homes is currently compiling its annual list of the 1,000 most expensive properties on the market in the country. This list is published in a magazine called Ultimate Homes, which also will include the 10 priciest listings in each state. Ultimate Homes is a new magazine, launched this May.