Swanky homes are now a global asset class
soars into the sky from the south bank of the River Thames, announcing its presence to central London. The new 50-storey tower contains 274 luxury flats that range in value from a merely expensive £1m to an eye-watering £15m. Thanks to its distinctive midriff the building has been nicknamed “The Tummy” by Robert Shiller, who won a Nobel economics prize for his work on spotting asset bubbles. The name might also apply to London’s bloated housing market.
One factor underlying that correlation is wealth creation. Thanks to a tech boom and a rapidly rising China, the world has minted new millionaires at a rate of 250 per hour for the past eight years. According to Credit Suisse, millionaires held 45% of the world’s household wealth in 2018, up from 36% in 2010. A good dollop of their money finds its way into posh properties, at home and abroad.
The cost of money is also having a slimming effect. Monetary policy, loose for so long, is tightening. Liam Bailey of Knight Frank, another consultancy, notes that it now costs 65% more to service the mortgage on a $1m home in America than it did three years ago. Granted, luxury-property buyers often pay cash; but their appetite may be dulled by falling yields. According to, a research firm, the gross rental yield on investible residential property fell below 5% for the first time in 2016.
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