Watching a ballet, you cannot help but marvel at the power of the movement, and the ability of the dancers to soar through the air, time and again, as if there were no limits to their stamina.
And so it is — well, almost — with the market for high-end properties, where the intensity of sales, at heights never seen before, defied gravity in 2012, whether it was in New York, London, Miami, Los Angeles or Hong Kong.
Is there a day of reckoning on the horizon? Just how many more buyers will be willing to pay $88 million for an apartment in Manhattan, or $121 million for a 10,000-square-foot Chelsea house like the one the developers Nick and Christian Candy bought in London in September? Or $117.5 million for a nearly nine-acre estate in Woodside, Calif., in Silicon Valley, the highest price ever paid for a residence in the United States?
The short answer is a lot. New reports out this week suggest that the residential luxury-buying ballet is very likely poised for a sustained performance.
The buying seems to draw traction from the fact that there will be so many more newly minted rich people hunting for properties. Over the next 10 years, some 95,000 more people around the world are expected to see their wealth grow to at least $30 million, according to a forecast by Knight Frank, a London-based real estate company, which puts the current number of such people at 189,835.
Then there are the global billionaires, a crowd with an almost insatiable appetite for trophy properties, like the penthouse at 15 Central Park West that the daughter of Dmitry Rybolovlev, a Russian potash fertilizer billionaire, bought last year for $88 million, or $13,000 per square foot.
The number of billionaires will grow by 85 percent over the next decade, to 4,076, Knight Frank forecasts.
Europe and Asia, which have more billionaires than anywhere else, will still lead the way. New York City is emerging as a favorite. “There was a stage three to five years ago where London was quite clearly the main market for Russian and European super-wealthy buyers, but New York is becoming so much more on the radar of these buyers,” said Liam Bailey, head of research for Knight Frank. “Latin American wealth really isn’t coming to London, it is going to Miami and New York.”
The buyers of luxurious penthouses, town houses and country estates are increasingly coming from the so-called BRIC countries — Brazil, Russia, India and China — where people are becoming very rich at a stunning rate. Even with inflation concerns in some of those countries, the combined annual G.N.P. growth of those four countries is equivalent to the creation of a new economy the size of Italy.
Knight Frank said that through 2022 China would see its pool of billionaires grow by 214 percent, to 483; Brazil by 157 percent, to 136; and India by 84 percent, to 225.
Consider, too, what is happening in Brazil, a country that has driven high-end sales in Miami, and to some extent New York, more than any other of late. The number of Brazilians with at least $30 million in assets is expected to climb by nearly 140 percent over the next decade, according to Knight Frank. A growing middle class and production of natural resources are at the heart of the wealth creation.
The Brazilians aren’t focused on buying fancier properties at home, although they are doing that as well. They want second and third homes abroad, and they want them now. Knight Frank found that Web searches by South Americans in 2012 for luxury residential properties surged by 82 percent, although they tend to focus on the lower end of that market. It was the region of the world with the biggest uptick. (Africa was second, with 48 percent, followed by Europe.)
Whether they know it or not, the global wealthy are facing stiffer competition from one another. Russians seemed to be everywhere scouring for trophy properties in 2012. They are facing increasing competition from Asian buyers, especially from China and Hong Kong, as well as from Latin America, Knight Frank said.
The buyer of the $117.5 million home in Woodside, for example, was Japan’s second-richest man, Masayoshi Son, according to The Los Angeles Times. Forbes has estimated his wealth at $8.6 billion.
Last year I seemed to trip almost unintentionally over the trail of a few Russian oligarchs and their real estate. Mr. Rybolovlev, who bought a $100 million home in Palm Beach, Fla., and the $88 million apartment in New York (bought by his eldest daughter, Ekaterina, through a trust), also has homes in Geneva and Monaco, and was once on the hunt in Los Angeles for a trophy home (he didn’t find it, brokers there say).
Vladislav Doronin, the Moscow-based real estate developer who dates the model Naomi Campbell, has spent more than $20 million to renovate a home on Star Island in Miami. He also has homes on the Spanish island of Ibiza, at the Time Warner Center in Manhattan, and at One Hyde Park in London; the latter two have become billionaire dens.
London, Miami and New York came to epitomize the so-called safe-haven market in 2012. Even with burgeoning demand from the wealthy for property — as a safer and potentially more profitable investment than stock markets and other financial instruments — the number of “desirable locations remains virtually static,” Knight Frank said. So buyers continue to focus on these few “key hubs.” But Knight Frank predicted that wealthy people this year would expand their searches to include European cities previously thought to be too economically distressed: Milan, Madrid, Barcelona and Dublin, which will join Munich, Berlin, Zurich, Geneva and Vienna as “core European targets.”
Some governments, concerned about affordability, are challenging the buying spree, through efforts to tinker with the luxury property markets. Last March the British government, seeking to crack down on tax avoidance, bolstered its “stamp duty” by 40 percent on properties valued over £2 million. Last month the Hong Kong government, concerned about a property bubble, raised stamp duties and tightened mortgage lending. But while the changes imposed in the United Kingdom have added revenue to government coffers, they have done little to slow the buying, Knight Frank said. Singapore also raised its stamp duty and made it tougher for foreigners to buy.
In the end, the global luxury property market is functioning in its own universe, seemingly removed from general real estate trends. It “remains relatively impervious to these trends and more closely follows the luxury goods market,” Christie’s International Real Estate said in a study released this week.
Cash is king. Buyers paid cash in every deal over $20 million brokered last year by Hilton & Hyland Real Estate in Beverly Hills, Calif., which saw a 64 percent increase in year-on-year sales volume, to $1.8 billion, from $1.1 billion in 2011, said Jeffrey Hyland, a co-owner.
Banks in New York, at least, have begun to lend more for construction financing. But credit for home purchases remains tight in the broader United States real estate market.
“Lenders are still afraid of their own shadow,” said Jonathan J. Miller, the president of Miller Samuel, a New York appraisal company. “Credit standards are just as tight” as they were after the collapse of Lehman Brothers in 2008.
Yet credit remains an afterthought in the world’s most expensive property markets, which continue to soar and show no signs of tiring.