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As student flats go, it takes some beating. In 2012, Russian billionaire Dmitry Rybolovlev spent a reported $88m on a penthouse in New York for his daughter, Ekaterina, while she was studying at university in the US.
Questions were subsequently raised — not least in a lawsuit by his former wife, Elena — about the extent to which Ekaterina had actually made use of the 6,744 sq ft apartment. “She does not attend school in New York,” Elena claimed in papers filed in New York State Supreme Court.
Yet whatever the position, the apartment, which has 10 rooms and a terrace curling around one of the top floors of 15 Central Park West, would have surely been the pinnacle of student accommodation.
As Elena’s lawyer, David Newman, said at the time: “That apartment is large enough to house her whole undergraduate class if she goes to school here.”
It used to be common for parents to snap up flats for their children when they went to university.
Super-rich parents The Russian billionaire
● Rybolovlev reportedly bought his daughter a $88m penthouse in New York
● The apartment is ‘large enough to house her whole undergraduate class’
Yet with property prices having reached stratospheric levels, particularly in cities such as London and New York, ensuring that youngsters can live in their own home while studying is now increasingly the preserve of the super-rich.
Charlie Walsh, director of Lodha, the Mumbai-based real estate developer, recently advised a buyer from Dubai who wanted to buy flats in London for each of his two grandchildren. “His grandson is currently at LSE studying economics and will most likely end up working in the Square Mile,” says Walsh. “So therefore he wants that consistency in terms of a base where his grandson can study and then work close by.”
The other property would be for the potential buyer’s granddaughter who is studying for her A-levels and whom he wants “to be as close to the legal heart of London as possible”.
One area that might suit such a wishlist is Holborn and the Strand, where proximity to two world-class universities — the London School of Economics and King’s College London — means it is in high demand. “It’s also less than 10 minutes’ walk to Goldman Sachs on Fleet Street, and the Deloitte headquarters is close by as well,” adds Walsh.
High-end one-bedroom apartments on the Strand typically sell for between £1.2m and £1.7m, according to a range of estate agents in the area. New-builds in particular are sought after by foreign buyers, leading to several new developments close to LSE and King’s College.
Super-rich parents 15 Central Park West, New York
● Ekaterina Rybolovlev’s ‘student apartment’ has 10 rooms and is 6,744 sq ft
● It features a wrap-around terrace on the top floor
Further afield, it is not uncommon for parents to splash out up to £5m on apartments for their offspring. In some cases, the budget can be much higher, according to Hugh Wade-Jones, managing director of Enness Private Clients, a mortgage broker for the super-rich.
“Certainly the most expensive student accommodation I arranged last year was just shy of £12m in Knightsbridge,” he says. “This was for a Middle Eastern family and for them it was a case of Knightsbridge being the only place that their daughter was going to live in — and that was simply the cost of the type of place that she was prepared to move into.” The property in question was a three-bedroom, 3,500 sq ft new-build a stone’s throw from Harrods. “It was about 3,300 sq ft larger than my ‘accommodation’ [at university],” adds Wade-Jones.
Despite the ebb and flow of students arriving and graduating in London, demand remains strong throughout the year. “Is it seasonal? No, it’s all-year round,” says Wade-Jones. “We arranged a house last year in Pimlico for an Australian billionaire. His son wasn’t going to uni for another couple of years, but the opportunity came up. It provides another element of justification. It can be that [buyers] are also looking to expand their own property portfolios — so they see it as also an investment opportunity.”
The prospect of Brexit has added to this bonanza. London’s high-end property market had slumped following the introduction in 2014 of higher stamp duty rates levied on homes costing more than £937,500. Yet since the UK voted to leave the EU, sterling has dropped in value making the UK capital more attractive again.
Even before the Brexit vote, London was a league apart from other European destinations, says Mark Hayward, managing director of the National Association of Estate Agents. “London has been distinct. France and Portugal have not been good for a number of years and they haven’t seen the house price growth that London has,” he says. “There are more foreign banks than ever in London currently, so it has very much been the hot place.”
Super-rich parents London
● The Strand is in high demand because it is close to LSE and King’s College London
● A typical one-bedroom apartment costs £1.2m to £1.7m
Questions over whether London will retain its status as the centre for global wealth have grown louder, with attempts by Dubai and Paris to lure wealthy UK residents to move abroad. Restrictions on non-dom residents coming into effect next April for those whose principal home is not in the UK could also provoke more to consider leaving.
Meanwhile, in university towns in the US, while foreign buyers are more active than ever, domestic purchasers remain the prime movers.
“There is a definite draw to university towns, both as a practical matter — guaranteed demand for housing, as well as a destination for parents who want to stay near their children — and for adults who want to be part of a dynamic cultural and intellectual environment,” says Ruth Kennedy Sudduth, executive vice-president of LandVest, a New England property broker and affiliate of Christie’s International Real Estate.
“In the Boston area, Harvard and MIT drive the always tight Cambridge housing market.”
Super-rich parents US
● Harvard and MIT drive the tight Cambridge housing market
● The area has attracted interest from Europe, South American and Chinese buyers
Kennedy Sudduth confirms the influx of foreign buyers in recent years. “On top of traditional interest from Europe and South America, we have seen increased demand from China over the last several years.”
Her colleague Amy Donovan, a broker at LandVest, says the consensus seems to be that roughly one-third of buyers of Boston’s recently developed full-service, upmarket, high-rise condominiums are international. “Asian buyers [are] more highly represented than ever, possibly approaching 50 per cent of that group,” she says.
A similar pattern can be seen across the US. In Los Angeles, Charles Black, executive vice-president of Hilton & Hyland, a real estate broker based in Beverly Hills and another Christie’s affiliate, reports that property prices are unsurprisingly higher closer to UCLA, but, as he points out, the university is also near many of the city’s most high-end neighbourhoods.
“There’s a good amount of foreign investment from the Middle East and from Asia,” says Black. “However, 80 per cent of all home transactions are from Americans. Parents will purchase homes outside of the area, and their children that attend universities will commute.”
Yet for parents unable to move closer to their children, being able to see them regularly is another factor behind many purchases. “Typically, they’re looking for one or two-bed flats,” says Jonathan Gordon, director of IP Global. “In many situations, they like to go and visit and have a place to stay rather than be in hotels.”
Super-rich parents Singapore
● Parents in stylish areas look for the trappings of a five-star hotel
● They are seeking assets such as a pool, 24-hour security and porter
The issue of housing security is also important, not least parents’ wish to protect their children from the vicissitudes of the letting market. “It is very common for clients who have offspring going to university not to let them enter the murky world of certain letting agencies and be the prey of other landlords,” says Wade-Jones at Enness.
“Chinese buyers in particular are looking for all the facilities to be available in the same block,” adds Gordon.
Yet for many students, sharing a flat with friends is part of the university experience, whether they can afford to go solo or not. In any case, a traffic cone — that ubiquitous student late-night acquisition — might look slightly out of place in an $88m apartment.
Hugo Greenhalgh is the FT’s wealth correspondent
Illustration by: Sarah Hanson
Photographs: Alamy; Reuters; Getty Images; Bloomberg