A luxury pad in one of the world's most exclusive neighborhoods might be seen as an indulgence for only the super rich. But international real estate developer Nick Candy told CNBC that for the shrewd investor with access to capital, it can often be a long-term commitment worth making.
By Paul Sakuma, AP
Luxury real estate can actually be a sound investment, an international developer tells CNBC.
Candy is one half of property duo Candy & Candy, whose most high-profile build was One Hyde Park — an apartment block in London's Knightsbridge area and one of the most expensive addresses in the world.
Sitting just yards from Harrods department store, the luxury boutiques of Sloane Street and a short walk away from Buckingham Palace, prices here range from a relatively modest $5 million to an astonishing $215 million for a three-story penthouse. But with 24-hour room service from the 5-star Mandarin Oriental Hotelnext door, wine cellars, bomb-proof glass and even panic rooms, is such an apartment a lavish folly or a wise investment?
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"People are buying for the long term," said Candy. "The (properties) will get passed down the generations. Something like this won't get built again for a long time."
And while a home worth $3,000-a-square-foot or more sounds like a big gamble, he is sure that long-term investments like these ride out the ups and downs of economic cycles. "I 100% believe that if you invest in the very best — not just in real estate, but in the rarefied world of commodities — then I believe that you will do very, very well."
An international city like London, it seems, is a safe place to invest even during downturns because of the constant cycle of foreign cash being pumped into the capital.
"London is still a very strong market. In the 1970s and '80s we had Middle Easternmoney; in the late 1990s we had Russian, Ukrainian and Kazakh money and today we have Indian and Chinese money.
"There is more international money coming in than ever before."
He warned that high-end properties can suffer from delays getting work done, overspending and plans that never come to fruition, but ultimately big cities have the international demand to make luxury property a winner.
"London can soak up — from the number of international purchases that are coming in — a lot of supply that is coming onto the market," he said. "We have very limited supply because it takes a good five, 10 years to build a good project. Limited supply, huge demand; (that means) prices will continue to increase."
Candy pointed out the seasonal variation in this particular market, meaning the prospective investor has to allow for the quiet summer months, during which high-worth individuals prefer to be out on their boats than in the city at the office.
So while the sub-prime mortgage crisis that ignited fears of a global downturn may have scared some off real estate investment, with 25 nationalities represented at One Hyde Park, Candy is sure that there is an international trend to buy big in property again.
A devalued sterling has made London property buying a particularly popular choice, but Candy explained that major cities all over the world are seeing similar success at the top end of the market.
"New York is still very strong, it's very American-centric though - 80% of people buying expensive apartments in New York will be home-grown Americans," he said.
"I think Dubai will have a bounce back partly because of the Middle East uprisings. The Gulf regions want to go and buy real estate in Dubai. Also when you have that big a correction and that big a fall, I believe that it will go up quite quickly as well."
And the best places for this kind of investment? Not surprisingly, healthy Asian economies provide the most stable conditions. "Hong Kong, Shanghai, Singapore; these are the areas of the world that I truly believe can sustain the high-end product, and will have the demand for it," Candy said.
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