Forget Hong Kong, London and New York: when it comes to the pinnacle in absolute real estate insanity – perhaps in all of history – look no further than James Bond’s favorite gambling mecca, Monaco.
It is in this tiny Riviera principality where we find the Tour Odeon, a double-skyscraper being built by Groupe Marzocco SAM near Monaco’s Mediterranean seafront, which will contain a 3,300 square-meter (35,500 square-foot) penthouse with a water slide connecting a dance floor to a circular open-air swimming pool. The description is nice, but it is the bottom line that is mindblowing: Bloomberg reports that the apartment may sell for more than 300 million euros ($400 million) when it goes on the market next year, French magazine Challenges reported. That would make it the world’s most expensive penthouse, according to broker Knight Frank LLP.
“We think we can get a little bit more,” Daniele Marzocco, a director at the company, said in June. So far, the developer has found buyers for 26 of the 36 luxury homes that have been offered for sale. A car parking space at the project costs 250,000 euros, Marzocco said. That’s about 50 percent more than the median value of an existing U.S. home, according to data compiled by the National Association of Realtors.
“What we sell is Monaco,” commercial director Niccolo Marzocco said during a viewing of the skyscraper, which is costing more than 600 million euros to build, excluding the land. He cited security, stability and the convenience of living in a city-state about two-thirds the size of New York’s Central Park.
How is this astronomical price possible? Simple: now that traditional luxury property markets are rapidly losing their glamor, not only due to the imposition of fresh “fairness doctrine” luxury real-estate taxes as previously reproted, but also due to the loss of such tax-havens as Geneva and Zurich, the world’s uber wealthy are left few places where they can live in relative quiet without the government constantly threatening to demand an ever greater part of their income and/or wealth.
“New levies on luxury homes in London and a U.S.-led global crackdown on hiding assets will also probably attract the affluent to Monaco, which already counts pop stars, Formula One drivers and Russian billionaires among its inhabitants. One in three of Monaco’s 38,000 residents are millionaires, according to a study by Spear’s magazine and WealthInsight. As that number increases, home values will rise by about a fifth by June 2015, according to London-based Savills. That would almost erase losses sustained since the market’s 2007 peak. “
As a reminder, the principality’s residents, who include Russian billionaire Dmitry Rybolovlev and pop singer Shirley Bassey, don’t pay taxes on income. The French have to pay taxes there, with certain exceptions dating back more than 50 years. Rybolovlev lives in the Belle Epoque building overlooking the harbor, according to a New York state court filing in 2012. For the rich, however, there is no more welcome sound than “no income tax” to make the price of any local lodging attractive, regardless of what it actually is.
Because judging by pricing data, what Monaco has discovered is perfectly inelastic demand: For $1 million, you could buy about 15 square meters (160 square feet) of space, Knight Frank estimates. That’s about a third of the size of the median studio in Manhattan, according to the Naked Apartments website. While just 15 new apartments sold there last year, the average price was 9.3 million euros, compared with 2.9 million euros two years earlier, according to government data. A model apartment now being offered has 270 meters of internal space and 130 square meters of balconies and is valued at 28 million euros. The lower floors were sold to Monaco’s government for use by local citizens, who will enter the building through a separate entrance.
In short, roughly an 80% annualized price increase in new home prices or, as Janet Yellen would call it “noise.”
As to where the biggest marginal demand comes from, take a wild guess:
The Tour Odeon will be Monaco’s first high-rise since the 1980s. A quarter of the apartments sold on the open market by Groupe Marzocco have gone to expatriates from the former Soviet Union, the company said, without disclosing where they’re based.
Surely, they will all be crushed by Obama’s “costs” any minute now.
That said, not everyone is absolutely insane when it comes to what is now the world’s biggest real-estate bubble in history: “It’s just a crazy market,” Pierre Vaquier, chief executive officer of Axa Real Estate Investment Managers, said in a March interview. “You buy there not only for the environment, but also for the tax regime,” said Vaquier, who said he’s not interested in developing homes in the principality.
However for the time being the lunatics are clearly not only in charge of the asylum, but are holding the checkbooks.
So for the low, low price of $400 million, this is what they will get. From the Tour Odeon’s official website:
via Zero Hedge http://ift.tt/VDIl2R Tyler Durden