From Bill Bonner’s Diary (USA) –
Real estate hotspots have seen a lot of phantom buying over the last 10 years.
In London and New York, for example, you find entire apartment buildings where no one is home. You can tell. Just look at them in the evening. Often, only the elevator shafts and hallways are lit. The apartments are all dark.
Both cities are now seeing softness in upper-end property prices; perhaps the tide has turned.
Top Manhattan apartments sell for more than $4,000 a square foot. At this level, a 1,200-sq-ft two-bedroom apartment sports a $4.8 million price tag.
“Super-luxury” space… one small step down from the top… sells for nearly $3,000 a square foot.
The law of supply and demand works in real estate as in other markets. But it is slower to express itself in bricks and mortar.
As prices rise, developers (who were burned badly in the last building spree) keep their eyes warily on the market.
First, they don’t believe the higher prices will last. Then, prices go higher… and memories fade. Eventually, builders become confident again.