The Value Proposition
The Value Proposition
You’ve got to love Oscar Wilde. The late 19th-century Irish author, playwright, and poet is still famous today for works like “The Picture of Dorian Gray,” and “The Importance of Being Earnest,” but in his own time he was also known for his keen sense of wit.
The world is a stage, but the play is badly cast. Some cause happiness wherever they go; others whenever they go. Work is the curse of the drinking classes. Wilde’s reputed dying words are also famous, uttered as he stared at the walls in a Parisian apartment:
Either this wallpaper goes, or I do.
And he also left us this gem:
What is a cynic? A man who knows the price of everything and the value of nothing.
Looking at the value of real estate, especially on the high-end of the world, brings home Oscar Wilde’s logic. Case in point, the real estate listing for this four bedroom, four bathroom townhouse:
If you’re not familiar with the address, that’s because it is in Hong Kong. And when realtors talk about location, location, location, one look at this listing and you might believe they had Hong Kong in mind when saying it.
The townhouse is 4,120 square feet, and that’s a nice size. You will have a charming view of the sea from the home, which is always a bonus. You even get bedrooms set up for two domestic helpers.
All in all, not a palace, but nice, right? So when you realize that this house is listed at $87.3 million, no one can blame you if you are surprised.
And one of Oscar Wilde’s cynics might already be working the calculator and calculate that 110 Repulse Bay is priced at $21,190 a square foot. An even more cynical person might question the sanity of listing a such a price—and of course, point out that it might not sell for anywhere close to that.
And it’s true. Nothing is worth anything until someone is actually willing to pay for it. But let’s look at the value proposition for 110 Repulse Bay Road.
First of all is the incentive of Hong Kong itself, a city that serves as one of the world’s leading financial centers, with a major capitalist service economy, low taxation, and free trade. In short, plenty of rich folks, leading to high demand.
Then there’s the fact that Hong Kong’s hilly terrain leaves less than 25% of the total landmass being developed, with 40% of the land area reserved as country parks and nature reserves. In other words, low supply.
Then there’s Repulse Bay itself. Despite the name, it would be hard to consider it repulsive:
It’s mostly a residential area—for those who can afford it. With a wide crescent beach and lingering sunsets, Repulse Bay commands some of the highest real-estate prices per square foot in the world; a nearby villa to 110 Repulse Bay Road was actually sold in 2015 for $104 million.
That was a selling price of $14,436 per square.
And cynics? If you want a bargain on a square foot price, look no further than here:
The Antilia in Mumbai is a 27-story building with lots of space, six underground parking levels, and, conveniently, three helicopter pads. Yes, that’s right—this is a single residence. It is owned by Mukesh Ambani, currently India’s richest man. With over 400,000 square feet and a value of over $1B, it’s only $2,500.00 per square foot.
As can be deduced from looking at real estate, putting a standard means of valuation in place is difficult. But that statement is true for anything that is more than a commodity. And even some items viewed as a commodity—coffee comes to mind—can have examples produced that are purchased willingly at a premium price.
Art can take many forms. A tapestry in the Louvre; street art in Chicago; Fearless Girl on Wall Street. And of course there can be art in architecture. A building’s design can produce powerful feelings in a potential buyer, just as a great work of art can stun, seduce, and whisper that it must be owned. And when you combine stunning interior details and functionality together? A price per square foot standard becomes a moot point for real estate, and value soars higher than the value of location, bricks, and mortar.
Don’t believe it? Canvas and oil alone are commodities. But add in an artist’s touch, and you can get Interchange, by Willem de Kooning.
The piece was painted in 1955 and was last sold by the David Geffen Foundation in 2015 to Kenneth C. Griffin. Interchange is of a healthy size, measuring 79.0 by 69.0 inches, or 6.58 by 5.75 feet. At an adjusted selling price of $303 million in 2017 dollars, the 37.835 square foot painting clocks in… at over $8 million per foot.
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As Oscar Wilde also said:
I have the simplest of tastes. I am always satisfied with the best.
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