Monaco to London: how far will $1m go when buying prime property? In parts of Monaco, it will only buy enough square metres for a WC; in London it will stretch to the size of a bouncy castle.
We may be about to witness the extinction of a very rare bird indeed: the $1m Monaco home. Savills agent Irene Luke hasn’t seen one on her books for several years. “We’re selling a parking space for €190,000,” she says, “so you’re not going to get very much for a million dollars.”
Luke taps at a computer, trawling through all sorts of listings the public doesn’t have access to. “OK,” she says, “I’ve found something.” It is a studio apartment on the lower ground floor. No pictures. Luke studies the spec. She is not overwhelmed. “I should think it’s pretty awful, actually,” she says.
The endangered status of the $1m home in Monaco has been hastened by rapidly rising property values. Average prices are up more than 15 per cent in a year, according to the IMSEE, the Principality’s statistics institute. However, as in many global cities, the top end of the market has struggled to keep pace. The Knight Frank Wealth Report, shared here exclusively with the FT, plots the performance of the top 5 per cent of property markets in cities around the world, and charts what $1m will buy you in prime real estate. While it is not much — even in Cape Town, the cheapest of the cities surveyed, $1m wouldn’t buy enough floor space for a decent game of tennis — it is not getting noticeably smaller either.
“Most global markets we’re tracking are seeing relatively modest growth or price falls,” says Liam Bailey, the global head of residential research for Knight Frank, who helped compile the report.
In Monaco, the most expensive city in the world, $1m buys you the same amount of floor space that it did last year: 17 sq metres. There are Sunseeker yachts in the marina below that are more affordable.
“Even when the rest of the world is collapsing around you, Monaco remains pretty stable in terms of prices,” says Luke, and that is what attracts the super-rich.
That and the favorable tax regime, presumably — there is no income tax payable in Monaco, and no capital gains or wealth taxes. In addition, property taxes, while high, have remained the same for years. Savills is selling a one-bedroom apartment in the Carré d’Or area, overlooking the hairpin bend at the Sun Casino on the city’s F1 circuit, for €3.45m. Overlooking the beaches in Larvotto, the same agent is selling a five-bedroom penthouse at the 21 Princess Grace building for €59m. At that price, $1m might just afford you the guest WC.
It is a different story in London. Stamp duty reform in 2014 — which increased the tax bill on all homes priced more than £937,500 — has helped cause property values in some central areas to fall by as much as 14 per cent in the past 12 months, according to Knight Frank. When you factor in the collapse of the pound against the dollar following the UK vote for Brexit in June, today $1m goes 36 per cent further than the 22 sq metres it bought you last year. It means that, in the plushest parts of Mayfair or Belgravia, $1m would buy you 30 sq metres of space, which aptly — considering what they say about the English and their homes — is about the same size as a castle. A bouncy castle.
Harrods Estates is selling a new 65.5 sq metre, one-bedroom apartment in Knightsbridge for £2.95m. In that space you could fit two bouncy castles — but you’d probably need to dangle the generators out the windows. Venture outside prime central London and $1m starts to look like a much more sensible budget.
“In St John’s Wood in north-west London, you could purchase a two- or three-bedroom home for that price,” says Robin Paterson, chief executive of UK Sotheby’s International Realty.
In Wimbledon, he says, $1m might buy you a four-bedroom family home. Five-bedroom penthouse in Larvotto, Monaco, €59m About a 10-minute drive from the All England Lawn Tennis Club, estate agency KFH is selling a four-bedroom terrace house with more than 140 sq metres of living space for £995,000. There is even a small back garden where you could work on your serve.
You will get no such luxuries in New York. According to the report, $1m buys you about 26 sq metres of prime floor space, which would make it a little tight even for a game of Swingball.
Still, investors might see the opportunity for a smash. They can expect a higher rental yield than they could in London, and buying costs are about 38 per cent lower per square metre. If they’re not daunted by the flurry of ultra high-end towers going up in Midtown Manhattan, which has sparked fears of an oversupply, then it might look like a safer bet than the UK capital.
Paris, too, might be looking more competitive than London. While its housing market has lagged behind London’s since at least 2012, it seems to have fared better of late, growing 1.2 per cent in a year, according to the wealth report, compared with an average drop in London of 6.3 per cent. Transactions are up too in the French capital, says Jelena Cvjetkovic of Savills, with 20 per cent more sales now going through its Paris office than this time last year. And with $1m buying you 55 sq metres of prime floor space you will get much more for your money: 83 per cent more than in London; and more than twice as much as in New York. In fact, in a $1m Paris apartment, you might just be able to squeeze in a female sperm whale, though you might consider getting the floor reinforced. In line with the average, Knight Frank is selling a 130sq metre, three-bedroom flat on the Rue Du Louvre for €2.3m.
“Personally, I think Brexit is fantastic news for Paris,” says Roddy Aris of Knight Frank, who says that many of the high-earning Parisians who decamped to London when tax-happy president François Hollande came to power, are thinking about moving back. “There’s a general sentiment that Paris is open for business again,” he says.
One wonders how long that sentiment will prevail if, come April, the election goes the way of far-right protectionist Marine Le Pen. And that is the point — as the world enters a period of heightened political uncertainty, ultra-low yields and slower economic growth, are there any prime property markets that represent a sound investment these days? Bailey admits that such opportunities are getting harder to spot.
“As growth moderates, investors are looking increasingly at back stories to help secure outperformance — so targeting investments which are benefiting from infrastructure improvements. Think of Crossrail in London,” he says, “or the infrastructure being put in place for Dubai’s Expo 2020.”
Capital preservation might be a more realistic goal. For that, there is always the Carré d’Or in Monaco, says Irene Luke. It has got the lifestyle, for one, and is politically and fiscally stable.
“Even during bad times you might see prices flatten out a bit,” she adds, “but you don’t tend to see drops.”
And there might yet be a twist in the tale. Changes to non-dom tax rules in the UK will come into effect on April 6, which has led some to predict a mass exodus of the super wealthy from London. Have they been knocking on Luke’s door?
“There has been a steady stream,” she says “no dramatic influx yet — but, I am anticipating it.” Maybe the days of the $1m pad in Monaco are shorter than first thought.
Main photograph: Kathy Collins/Getty Images