Rich real estate rewards

Luxury properties going for a bargain; high net worth individuals plan to buy property...

This week in a wrap of the property news making the headlines: the rich, we are told, are tucking in to the property sale of the century, thanks to former high-fliers falling fast.

Luxury property feast. Rich people want more property, is the story that captured many of the international headlines this week.

"The media might be blaring terrifying headlines about how bad the real estate market is, and there are plenty of pundits ready to declare the death of real estate as an investment. But the people who actually have a lot of money are bullish," noted WalletPop about the matter.

A new survey conducted by Knight-Frank and Citi Private Bank found that nearly 55% of high net worth investors plan to increase their residential real estate investments over the next one to two years, it said.

". . . Despite house price falls, the rich are committed to property as an asset class and the results of our Attitudes Survey, which represents the views of a cross section of Citi Private Bank's wealthiest clients, reveal that 55% plan to increase their exposure to residential property over the next two years. In turbulent times the wealthy want their investments to be both tangible and transparent,' Liam Bailey, Head of Residential Research at Knight Frank said.

Repossessed riches. The FT's Weekend House & Home also devoted much space to analysing the trend. It reported on how the vultures are gathering around prime properties.

It named Arjan Buikema, a South African research analyst with Naspers, as among those eyeing top-notch real estate bargains. It said "the object of his affection is a plot outside Cape Town. It's in a sought-after area and has a glorious sea view".

"He has done his research: the owner's debt outweighs the value of her various properties and she's been trying to sell this one for more than a year. Buikema, 39, suspects her lender may seize it soon."

"I am just being patient," he said, "not approaching but waiting for the banks to force her to sell. At some stage, hopefully, I can get it at a price that is decent to me."

The FT told us that as the global financial crisis grows, the risk of mortgage default has spread from modest first-time homebuyers to the high end of the market. "Luxury properties still form a small portion of the foreclosures from New York to Dubai. But tighter credit, rising unemployment and falling house prices are pushing even those with estates and mansions to hand keys back to the bank or to sell at deep discounts before they have to."

"There are a lot of people who are in trouble [and] some incredible bargains out there," agreed Michael Firewalker, president of World Venture Management, an asset manager based in California. "He should know, having just gone shopping for luxury properties with delinquent owners, looking at everything from casino hotels to country manses and finding some to be discounted by 60%."

He is checking overseas markets too - hotels in the Caribbean and wine estates in Italy, France and Australia - but so far his prime hunting grounds have been the US foreclosure capitals of California, Florida and particularly Nevada, where one in 14 homes was seized last year, said the FT.

The trend is the same in Florida, which has the second highest foreclosure rate in the US. "We are currently representing hundreds of investors and homeowners of short sales and many of these people are sophisticated, high-net-worth individuals who simply made the decision to stop throwing good money after bad," A Linn Wyllie, principal broker of Wyllie Dammer Commercial Investment Real Estate, which specialises in distressed property worldwide, told the FT.

Outside the US, we are told, bargains among top-notch properties are rare since the wealthy tend to pay cash or are not highly leveraged. But, when there is one, "it's sensational", said John Brian Losh, publisher of

Bargain time on the Atlantic Seaboard. Expensive properties on the Atlantic Seaboard - possibly South Africa's top luxury residential real estate belt - have come down in price. This presents the perfect buying opportunity for those who wish to own property in the area, said Di Reid, principal of the Atlantic Seaboard Chas Everitt International franchise, this week.

She reckons properties in the suburbs of Clifton, Bakoven and Camps Bay are still expensive, but have become that much more affordable.

"Demand for property in these elite suburbs has tapered off over the past year, causing prices to drop, and homes in Camps Bay are now selling for between R4,5m and R10m. Bakoven homes are achieving prices of R8,5m and the bulk of Clifton apartments are selling for between R6,5m and R10m. Although still high, these prices are between 6% and 21% lower than six months ago," said Reid.

"So if ever there was a time to buy property on the Atlantic Seaboard then this is it, and we have fielded a number of enquiries lately from those who have had an eye on property in these areas for some time."

The current buyer mix in the area, Reid told the South African media, consists of both locals and overseas investors, some of whom are buying for cash and deliberately seeking out desperate sellers who might be willing to drop their prices still further in return for a quick and easy transaction.

At the same time, the demand for older properties in these affluent areas has increased. According to Reid, many of the older homes priced at between R4,8m and R6m are being bought and renovated or demolished to make room for contemporary sectional title properties.

Such properties have gained a strong following and are being rented out for between R15 000 and R25 000 on average to those looking for an upmarket address, said Reid.

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