Chart of the Week
Chris Spillane and Thomas Biesheuvel
Billionaires investing in a luxury London home would have had higher returns from gold in the fixtures and fittings than the property itself in the past decade, according to Knight Frank.
A typical so-called super-prime property in London's Kensington district would have cost 24,000 ounces of gold 10 years ago, compared with about 9,800 ounces now, Knight Frank says in a report. "To visualise this, 9,800 ounces would be a cube about the size of a small footstool, admittedly a heavy one," the London-based real estate broker says.
The chart of the week shows how the value of super-prime homes doubled in the past 10 years and climbed 14 per cent since their previous peak in March 2008. Gold prices have surged more than fivefold in the past decade. Knight Frank defines super-prime as homes valued at or above £10 million (HK$124 million) in areas such as Knightsbridge, Kensington, Mayfair and Belgravia.
"Some seriously rich people have gold taps in their bathrooms," says Anna Sofat, founder of wealth-management adviser Addidi. "Every asset class has a cycle. Property is more placed at the high end of a cycle with potential for it to drop. Gold was in the doldrums for 20 years and is probably a better bet."
Luxury homes have held their value better than cheaper residential properties in Britain because of a scarcity of prime real estate for sale, particularly in the capital. Investors from the Middle East and mainland Europe consider central London housing a haven from economic and political unrest in their own markets.
Ed Miliband, leader of the opposition Labour Party, may campaign for a tax on Britain's most expensive homes, a key policy of the Liberal Democrats, the junior party in Britain's coalition government. Chancellor of the Exchequer George Osborne in March raised sales tax for homes valued at more than £2 million from 5 per cent to 7 per cent.