Dollar strength to create problems
All the best humour is deadly serious. I contend that the finest comics and satirists are really true cynics – idealists who examine the way the world is against the bright light of their own, very pure notion of what it should be. When they find that reality falls short of their ideals, they snarl. They try to change the world by pointing out the lunatic inadequacy of the way things are.
My point is, that the best humour is true to life as it is, and makes us think about how it should be.
But that's enough of the introduction to basic humour. So here's an old joke with a very serious financial subtext of direct relevance to today's global property markets – specifically, in London, the French Riveria and Dubai.
Our story originated in the Moscow of the mid-90s – a time when the middles classes had their savings wiped out, the Communist system finally died on its feet, and gangster capitalism and handguns in the boardroom.
It was also a time of fabulous wealth for a few (the oligarchs and their cronies) and the emergence of a predilection for conspicuous consumption that is still very much a part of mainstream Moscow business culture.
The tale itself concerns two businessmen. Ivan notices that his friend Viktor has a new gold Rolex watch.
How much did it cost, asks Ivan.
$50,000 (Dh183,500), announces Viktor, with a small smile.
And where did Viktor get it?
Viktor reveals the address of an exclusive shop on the Arbat.
"Fool!" cries Ivan. "I know a place just a couple of minutes away where you could have got the same thing for twice as much!"
There is still plenty of mileage in the principle of "if you've got it, flaunt it" among the Russian plutocrats – and the Asians too, if I read the runes of what's happening with Li family right (but more of that in another column).
My contention that flashing the cash is still very much in vogue at the top end of the market is supported by a number of deep niches that remain impervious to the vicissitudes of the credit crunch and all those boring economic ills that affect the common herd (people like me, gentle readers, bit not all of you, I'm sure).
The modern art market (specifically Jackson Pollock, and latterly the truly dismal work of Jonathan Rothko) is booming on the back of Russian and Asian investment. Wine, too, is a popular investment. But property is top of the tree.
No-one can really be quite sure which is Europe's most expensive residential property, as, I suspect, real wealth requires true secrecy.
Some of the most sought-after properties change hands without the common herd ever being aware that the assets had come on the market.
An exception to this rule is the recent acquisition of the Villa Leopolda. Sited in Villefranche-sur-Mer on France's Cote d'Azur, the property has been acquired for $500 million by a Russian billionaire.
Now, this property has cachet. Formerly owned by the Safra banking family, it has reportedly housed guests as famous as Ronald Reagan, Elvis, and Frank Sinatra. The estate agents who did the deal claim that the market in ultra-exclusive locations is more buoyant than ever.
Well, that may be so, for the moment. But think back to my little Russian joke. It makes a simple point that the cachet in buying an object does not really come from the object itself, but the expense of its acquisition. Thus the same object, at twice the price, would have more cachet.
What does this tell us (other than the obvious fact that explaining jokes is deadly dull)? I believe that the strength of the dollar is going to create real problem for these exclusive, high-end markets which have so far not seen any kind of downturn.
Comment on global currency rates is not my brief here. But I contend that the dollar has well and truly turned. It is strengthening rapidly against sterling, the euro and its prospects against the dirham look very good to me too.
In short, viewed from the prospect of the dollar-rich billionaire (commodity oligarchs spring to mind) these prize properties will soon seem embarrassingly cheap.
The Villa Leopolda transaction has broken the previous record residential property deal of $220m. Britain's richest man, the Asian billionaire Lakshmi Mittal is reported to have paid this sum for a home next door to Prince Charles's pad in Kensington.
But that sum will seem like what you'd hand over for some miserable hut selling kebabs when you consider what Indian industrialist Mukesh Ambani is planning.
Asia's richest man is soon to move into a 27-storey mixed-use development (family residence and the offices of his own businesses). Located in Mumbai, estimates put the value of the development at around $2 billion. Its design, appropriately enough, is apparently themed on the Hanging Gardens of Babylon.
So I fear for Kensington, Chelsea, Knightsbridge, the Cote d'Azur and Dubai for the perverse reason that the rising dollar means they won't be expensive enough to attract the interest of the mega-rich.
That said, I've been very impressed with the size and scale and ingenuity of Dubai property development. When you look at the 1.4 billion square feet Waterfront development that Middle East property developer Nakheel has taken on, the sheer scale and logistical difficulty make one think of, well, something not unlike the Hanging Gardens of Babylon.
I was surprised to learn that this and another Nakheel development, the transformation of the QE2 liner into a luxury resort hotel, is being managed by a huge system of super-smart internet-based software that allows the project managers to co-ordinate the efforts of suppliers from all over the planet.
Each contributes its own bit to the project and is given access to relevant buts of the site. The system software is rented out to developers such as Nakheel by a highly successful and dynamic company based in England, BIW Technologies, which is, apparently, looking for investment capital (a market listing is a possibility, once the markets pick up).
I wish the company luck. Without systems like BIW's platform, major global-scale developments wouldn't be Hanging Gardens of Babylon, more disorganised Towers of Babel. Mind you, not using clever systems would be one way of making them that much more expensive.
Martin Baker is a journalist, author and commentator on international business affairs.