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Brett Arends' ROI
April 19, 2011, 7:19 a.m. EDT
View all Brett Arends' ROI "º
"¹ Previous Column
S&P move good for gold, ominous for Treasurys
First Take "º
Goldman is up to its old tricks
By Brett Arends, MarketWatch
LONDON (MarketWatch) "” Is this the biggest bubble in the world?
I hesitate to use the overplayed word "bubble." But in the case of London property, it's hard to avoid.
What's happening here is absolutely ridiculous.
Markets are being impacted by housing-sales data along with fears over northern European economies and a stronger Japanese yen.
Look in the window of any real-estate agent here and you think people have gone crazy "” and then you realize that the prices are in British pounds, and that to convert to dollars you have to add another 60%.
Half a million pounds ($800,000) for a one-bedroom condo with a small garden on the southern, unfashionable side of the river Thames? Really? And $2 million for a modest two-bedroom condo in Chelsea?
As John McEnroe used to say at Wimbledon, you cannot be serious.
While the rest of Britain grapples with austerity, falling real wages and budget cuts, London real estate "” super-prime London real estate, the best of the best "” is back in the grip of another mania.
According to an index maintained by high-end real-estate firm Knight Frank, prime central London prices are nearing and may even be surpassing the giddy levels seen at the peak a few years ago. The brokers' windows tell the same story.
It's like that whole Lehman thing never even happened.
What's going on?
"London property is the "?Swiss bank account' of the 21st century," Robin Hardy, an analyst at London investment firm Peel Hunt, explained to me. Rich people in places like Egypt, Syria and southern Europe are rushing to get their money away from the turmoil, and for want of a better alternative, they are plunking it down in the "millionaire's playground" of central London.
"It's seen as a relatively safe place to put your money if your objective is capital preservation," he said. They think money is "safer invested in an apartment in Sloane Street than in a bank account in Damascus."
Foxtons, a high-end real-estate agency, told me that 80% of its sales this year at its Sloane Square branch have come from overseas buyers.
This is just the latest twist to a story that's been running for some time. Gulf sheikhs. Russian oligarchs. Newly rich Indian and Chinese tycoons. London has become a magnate for the international super-rich: a millionaire's playground. Russian money has been flooding in for at least a decade. One hedge-fund manager here told me London property was a "laundromat for Russian money."
Brett Arends is an award-winning financial columnist with many years experience writing about markets, economics and personal finance in Europe and the U.S. He has received an individual award from the Society of American Business Editors and Writers for his financial writing, and was part of the Boston Herald team that won two others. He was educated at Cambridge and Oxford Universities, and has worked as an analyst at McKinsey & Co. He is a Chartered Financial Consultant (ChFC) and Accredited Asset Management Specialist (AAMS). His latest book, "Storm Proof Your Money," has just been published by John Wiley & Co.
Until recently, when it came to managing earnings expectations, there were few companies that rivaled Goldman Sachs, but the market may not be the audience the bank needs to impress.
11:37 a.m. Today11:37 a.m. April 19, 2011
"S&P move good for gold, ominous for Treasurys http://on.mktw.net/gMJas8" 1:07 p.m. EDT, April 18, 2011 from MKTWArends
"Small-cap investors paying too much for risk http://on.mktw.net/eY33Qt" 11:23 p.m. EDT, April 14, 2011 from MKTWArends
"The safest bonds in the world http://on.mktw.net/ftH0Ws" 11:33 p.m. EDT, April 12, 2011 from MKTWArends
"Why Europe's debt crisis isn't over http://on.mktw.net/gKcxCj" 11:08 p.m. EDT, April 11, 2011 from MKTWArends
"Is America the next Portugal? http://on.mktw.net/gf7KHk" 11:48 p.m. EDT, April 7, 2011 from MKTWArends
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