NYC and a tale of Luxury Condos

3 mins. to read

If you thought Switzerland or Lichtenstein was the best place to put money your money out of reach from ‘prying eyes’, high taxes and/or seizure perhaps even Panama, the Cayman Islands or in some other beautiful and peaceful small island, then think again. You couldn’t be further from the truth.

With the financial crisis hitting the financial sector and Governments around the globe like the tornado that just hit the US Midwest, nothing was deemed “safe” anymore and even countries like Switzerland were forced to substitute the unbreakable solid steel on their door vaults with transparent thin glass. With recent legislation and treaties between the Swiss and US tax authorities, it will be much easier for ill gotten gains to be confiscated and, most especially, to trace. In fact traceability is the keyword here, as many of those individuals depositing funds into offshore banks are looking for anonymity, trying to keep their money abroad and so out of reach from their own Governments. Why? Just guess how these people earned that money and how much have they paid in taxes!

Switzerland is no more the place of choice for all those Russian oligarchs and Asian billionaires to store their wealth. They have also seen what can happen in Cyprus too. In this later case, people with bank accounts worth more than €100,000 saw funds frozen and are being forced to contribute more than 40% of their own deposit money to solve the financial mess in the country. The crackdown doesn’t end here either and Luxembourg is next on the soon-to-stop-accepting-money-without-questions country list.

But people with millions, if not billions, are, it seems, refined in manners and exquisite in taste and they just found a new way of keeping their wealth safe. They’re exchanging their dollars, euros and roubles for hard assets, especially million-dollar luxury condos in the best Cities in the world. From London to New York, anything goes on the property front to keep money out of reach of potential confiscation or tax seizure.

432 Park Avenue

When CIM Group and Maklowe Properties started building the billion-dollar 84-story tower at Park Avenue in NYC, I’m guessing that they could never have hoped that people would be willing to pay in advance just to guarantee a future share on the beautiful central park view. The luxury residences are only partially built but many are already sold to… Oh, they don’t know! The housing market is no banking sector and thus isn’t subject to money laundering rules. Why would they harass their clients with annoying questions as to who are the ultimate owners?

But, with a penthouse on the top floor selling for $95 million (Yes, that’s right! There’s no typing error – $95m), even the first floor of residential apartments on 34th floor run to millions of dollars and so price out all but the wealthiest citizens of the world. If you just bought a condo in the building, you will most likely have an Asian billionaire, a South-America tycoon, or an Arab Sheik as your next door neighbour. If your budget is ‘tighter’ than these people however, you can opt for a four-bedroom apartment selling for $44.8 million or even a two-bedroom apartment for a mere $10 million.

In the lower floors there are also maid’s quarters for sale, which are essentially studio apartments, and have prices ranging from $1.5 to $3.9 million. Unfortunately, those are only available for residents already owning a larger apartment in the building!

At a time when the housing market in the US has just been through one of the toughest periods in history, it seems that the ultra-luxury segment was unaffected. Basically there are only two markets: the ultra-luxury and subsidised housing. The financial crisis has only served to contribute to increase the gap between the rich and the poor. While those tycoons seek new ways to avoid paying taxes and to hide their money, buying luxury condos in New York, London, Singapore etc, there is a lack of affordable housing in the many of these cities and which, in NYC, resulted in a record number of individuals seeking refuge and a home in so called “shelters”. In March alone this was 50,700. There are currently458,689 total individuals in shelters (27,988 adults and 20,707 children).

A family in New York must earn at least $54,000/year to find an affordable home but household income for renters in Bronx and Brooklyn is barely $30,000 and $35,000 respectively. Yet another example of how the QE policies in place are serving only to enrich further the top 1% whilst the rest of the populace gets ever squeezed. At what point revolution..?

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