Surprise: Housing slump doesn’t affect the rich

Four years ago when Middleburg, Va., landowner Zohar Ben-Dov learned that his neighbors planned to sell their lush rolling land, he was concerned that a new owner might come in and spoil the pristine views surrounding Kinross, his 587-acre horse farm. The solution? Buy the 150 acres that were for sale.

But before Ben-Dov could get to the bargaining table, a local developer snapped up the property, with plans to subdivide it and build a half-dozen or more homes.

The new owner was surveying the land when Ben-Dov offered significantly more than he would’ve paid just a couple of months earlier. That closed the deal.

“Even if it [development] hadn’t spoiled the view for us, which it would have,“ says Gunter, “it certainly would’ve spoiled the whole area.“

To protect it from future subdivision, Ben-Dov, a New York real estate investor who has lived in Middleburg for years, has established conservation easements. He divided off 102 acres and built a 12,000-square-foot home—placed so the view from Kinross remain unspoiled—that he plans to sell. With a caretaker’s cottage, a barn and landscaped and irrigated lawns, Gunter expects the place to fetch $13 million to $15 million. He won’t say whether the deal is a money-maker or a wash. Either way, he says, it was worth it to save the land from development.

In the rarefied air occupied by the ultra-wealthy, large real estate purchases may be made less for financial gain than for convenience and enjoyment. Even in the sagging real estate market that saw primary residence sales fall 10 percent between 2006 and 2007, that thin slice of the market where millions of dollars change hands in a single transaction has slowed only a tad.

“I think when you get into the extraordinary properties it doesn’t matter if the mortgage rates are up or down, if the market is slow. When these people want to buy, they buy,“ says Cindy Barnett, an associate broker in the Richmond office of Select Properties of Virginia, an affiliate of Christie’s Great Estates.

Barnett’s company holds the exclusive listing on Point Farm, a $41.7 million estate overlooking the Chesapeake Bay. Located in Northampton County on Virginia’s Eastern Shore, the waterfront home has been on the market since last summer.

The estate belongs to Daniel A. Hoffler, chairman of Armada Hoffler, a development and construction company in Virginia Beach. It sits on 130 acres, including 2.5 miles of shoreline with a 20,000-square-foot manor house, a pool, tennis court, 16-stall horse stable and fenced riding rink, salt-water stocked fishing ponds, three piers and a boathouse.

For most Americans, discretionary purchases - whether it’s a vacation home or just a vacation - are the first items to go in a recession. And in today’s slowing economy, many people are holding onto money that just five years ago would’ve flown out the window for investments or luxuries. In that upper-end market, though, homes priced in the double-digit millions usually are second, third or fourth homes.

“That piece of the market does march to a different drummer,“ says Walter Molony, an economist with the National Association of Realtors.

One measure of the minor dent in the elite market is an increased emphasis on international marketing. Real estate brokers and agents say they are reaching out to international buyers hoping to take advantage of the weak dollar. “The number of Europeans coming to look has picked up considerably,“ says Diane Bellaschi of Long & Foster in McLean, Va.

Late last year, Dubai—part of the United Arab Emirates—bought a McLean property with two kitchens and a terrace pool overlooking the river for a little more than $11 million.

There is an emerging industry of making private overseas real estate transactions smooth and easy. Companies like HIFX Inc. in San Francisco offer a list of services that first-time foreign buyers and sellers might fail to consider, such as locking in the dollar’s exchange rate. The concept originated in England.

In addition to helping buyers navigate the labyrinth of legal and financial issues associated with a foreign buy, HIFX President Ward Naughton says companies like his are more economical than letting the bank handle transactions.

“We get the difference from what we get the funds at versus what we sell them to you for,“ he says. “We take a lot lower spread than the banks do.“

Properties of more than $5 million tend to stay on the market longer than those with lower prices, Bellaschi says. Yet, wealthy sellers may not feel the pressure or the pinch when their estate sits for a while. “Some can be on the market for six months or more. It depends on how well-priced it is.“

Some brokers are beginning to see an upswing in the market for high-end homes. “We seemed to be at a little bit of a lull there for a while,“ says Bellaschi. “It’s picking up now. People are seeing it’s an opportune time to buy.“