Luxury Home Deals Abound. Dubai, Anyone?

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Dying to buy a deeply discounted condo in the Islamic world's playground, Dubai? Does your heart palpitate at the thought of a cut-rate beach villa in Portugal's western Algarve region? Or perhaps you're feeling lucky, and want to take chance on a lavish townhouse in the heart of Dublin, Ireland?

If the answer to any of these seemingly arbitrary questions is yes, then you're in luck right now. According a report sponsored by British real estate firm Knight Frank LLP and Citi Private Bank, the luxury real estate markets in these three areas have dropped 45 percent, 33 percent and 25 percent, respectively, in the year ending December 2009.
Globally, wealthy individuals pulled back from purchasing residences in beach spots, ski destinations, and bucolic country settings in 2009, as the economy left even the world's richest residents reluctant to extend themselves financially. As a result, prime real estate values in 56 locations dropped an average of 5.5 percent for the year. While 73 percent of the markets tracked dropped in value, some types of properties fared worse: Coastal second home prices plummeted 14 percent while European ski resorts saw declines of about 12 percent.

But a quick glance at the list of international hot spots offering stylish digs at bargain prices includes plenty of the world's most desirable locations, complete with double-digit dips. Monaco, San Francisco, Tuscany, Bourdeaux and Barbados have all experienced price declines of between 15 percent and 20 percent in the top tier of available properties. Also, posh pads in the Cayman Islands, Manhattan, Paris, and the Hamptons are all trading at 10 percent to 14 percent price cut.

And while the rich are still rich, they might not be getting quite rich enough to shell out premium bucks for what may be a depreciating asset. Some 91 percent of Citi Private Bank's customers who responded to a survey expected their net worth to be either flat or slightly higher in 2010. But these deals might not last for long. "Low savings rates have encouraged the wealthy to move investments out of cash and into property in search of acceptable yields," reports Knight Frank.

Cities overall fared much better than other luxury real estate locations last year. Chinese cities Shanghai and Beijing experienced remarkable 52 percent and 47 percent price jumps, respectively, in 2009. Hong Kong, Rio De Janiero, London, Washington, D.C., and Zurich all registered real estate price increases too.

One caveat: Wealthy Europeans are the biggest property enthusiasts in the world, sinking nearly half their net worth into real estate investments. So if you're serious about buying something--and you have a couple million bucks to spare--why not make 2010 the year to buy a pied a terre in Tokyo (12.5 percent drop) or a luxury villa in Mallorca (down 15 percent)? If you don't, someone in France, Germany or England will.

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