The rich crib crunch

They’ve taken a battering on the sharemarket, had to sell the yacht, and they are even wearing last season’s suits. Now, JAMES THOMSON reports, the ‘humble’ homes of some of the richest people in the world are in the firing line.

By James Thomson

They’ve taken a battering on the sharemarket, maybe had to sell the yacht, and even considered wearing last season’s suits. Now their ‘humble’ home is in the firing line.

You only need to look at the auction clearance results published every Monday to realise how hard it is to sell a house at the moment. But if you think flogging a three bedroom brick veneer in Brisbane is hard, spare a thought for US financial guru Marty Zweig.

In late October, Zweig withdrew from sale his $108 million penthouse at the Pierre Building in New York. The veteran investor has been trying to sell the property for four years, but the financial crisis has made his quest to secure a high enough offer almost impossible.

Zweig is not the only struggling seller. According to Forbes magazine, financier Leonard Ross, who had asked $254 million for the Hearst Mansion in Beverly Hills, ended his sales campaign in late September due to a lack of interest.

It is little wonder these entrepreneurs have taken their trophy homes off the market. With share prices tumbling, financial giants collapsing, and bonus payments being slashed, prestige property prices are falling around the world.

Prestige property in Australia’s most expensive city of Sydney is reportedly down by around 15% on a year ago, according to real estate agents. To add insult to injury, the exclusive suburb of Vaucluse even made it on to a list of the 10 Australian suburbs hit hardest by mortgage stress.

The recent sale of a mansion belonging to property developer Avi Hershco highlighted the poor state of the market. The three-bedroom home was sold via a mortgagee auction for $4.1 million, well below the $7 million asking price – and just below the $4.3 million Hershco paid in 2005.

In London, property prices in the city’s nine most expensive suburbs (minimum price $2.4 million) have fallen by 14% in the last 12 months. The distressed sellers keep coming. Last week, Austrian property tycoon Cevdet Caner was forced to put his Mayfair mansion up for sale for just $34 million after his property investment empire collapsed. Caner reportedly spent $52 million buying and refurbishing the property.

It’s not just sellers feeling the pinch. According to Britain’s Daily Mail, a struggling investment banker lost his $1.14 million deposit on a $7.4 million house after failing to make his expected bonus and watching his stock options fall 70%.

Things are also looking grim in the billionaire’s playground of Dubai, where work has halted on a string of huge apartment projects and investors are furiously trying to offload luxury properties purchased off-the-plan. Real estate asset management firm RichVille has gone so far as to call for master developers to delay any upcoming repayments by six months to avoid defaults and “panic in the market”.

The distressed sales have already begun. In late November, Dubai-based Elysian Real Estate sent text messages to 40,000 customers offering a luxury six bedroom, six bathroom villa in Dubailand, a multi-billion-dollar luxury theme park. The villa, which will be completed in 2009, was advertised for just $8.9 million, half its original price. Property prices at the iconic Palm Jumeirah island development have reportedly fallen as much as 40% since September.

Forbes magazine’s annual list of the most expensive properties up for sale shows a sharp drop in the value of high-end property in the United States.

In 2007, the list included a string of properties well above the $150 million mark, including the $254 million Hearst estate mentioned above, a $209 million chalet in the resort town of Aspen, a $194 million property listed by Donald Trump in Palm Beach, Florida, and $240 million estate planned at the Yellowstone Club, a private ski and golf community in Montana.

Many of these exclusive homes are no longer for sale – for all the wrong reasons.

The Hearst estate has been taken off the market, the chalet in Aspen failed to sell, and the Yellowstone Club has gone bankrupt.

Still, the 2008 Forbes list includes some pretty spectacular piles.

Top of the list is a Beverly Hills estate called Fleur de Lys, which is modelled after Louis XIV’s palace at Versailles. The home, which is valued at $190 million, has five acres of landscaped grounds, a library and a nine-car garage.

Second is a Jacobean manor in Greenwich, Connecticut, which is also valued at $190 million and has 14 bedrooms and 13 bathrooms.

In third place is an English manor in Windlesham, in county Surrey. The estate, valued at $170 million, is larger than either Buckingham or Hampton Court palace and has 103 rooms.

Of course, these are just the list prices. In today’s market, you just might be able to snap up one of these estates for $150 million if you can drive a hard enough bargain.