By Jens Fischer
Many people think that if there is a crisis, crisis is everywhere. However, there are several sunny islands in the storming ocean, that keep prospering and attracting survivors. Name of one of them is Luxury Real Estate. The American real estate crisis has reached Europe – a fact that cannot be denied on the one hand but that has to be seen in different ways. Whilst prices in many regions and countries in Western Europe for standard houses have dropped up to twenty-five percent in 2008, which applies to almost all countries in Western Europe, the luxury market remains relatively stable. No substantial consolidation can be seen here, nor do experts expect a consolidation period to come during the next months.
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The European luxury property market mainly refers to properties in traditional, posh, sought-after and highly reputable prime locations throughout Europe. Prices ranging from 1 million Euros up to more than 125 million Euros are being paid to some of the most exclusive freehold houses and mansions currently on the market in France and Spain and 750k and more for exclusive condos. Such properties usually qualify as luxury consumer goods pretty similar to sports cars, yachts and jewellery, and therefore are less influenced and affected by the general market downfall. Buying these properties is of a rather more emotional than of a reasonable nature and as a result is subject to differing behavior.
Furthermore, buyers of luxury real estate usually do not call for any financing and are therefore not involved in the current finance and mortgage crisis. That distinguishes them from the majority of normal house owners in Europe who usually require loans covering up to ninety percent of the purchase price. Indeed, these are heavily affected by the crisis, since interest rates increased significantly, people are about to lose their jobs and, therefore are no longer able to effect their payments. However, banking companies tend to be patient and judicious with several of those owners, granting deferment of payment. It is pretty obvious that granting such periods free of redemption and payment of interests is the lesser of the two evils for the banking companies. Currently foreclosure sales are not realizing a fair market price, nor do they often cover the amount borrowed. But this is particularly related to standard houses and does not apply to the luxury sector in general.
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