Category Archives: Luxury Housing

The Global Mansion Bust Has Begun

Global real estate consultancy firm Knight Frank LLP has warned that the global synchronized decline in growth coupled with an escalating trade war has heavily weighed on luxury home prices in London, New York, and Hong Kong.

According to Knight Frank’s quarterly index of luxury homes across 46 major cities, prices expanded at an anemic 1.4% in 2Q19 YoY, could see further stagnation through 2H19.

Wealthy buyers pulled back on home buying in the quarter thanks to a global slowdown, trade war anxieties, higher taxes by governments, and restrictions on foreign purchases.

Mansion Global said Vancouver was the hottest real estate market on Knight Frank’s list when luxury home prices surged 30% in 2016, has since crashed to the bottom of the list amid increased taxes on foreign buyers. Vancouver luxury home prices plunged 13.6% in 2Q19 YoY.

Financial hubs like Manhattan and London fell last quarter to the bottom of the list as luxury home prices slid 3.7% and 4.9%, respectively.

Hong Kong recorded zero growth in the quarter thanks to a manufacturing slowdown in China, an escalating trade war, and protests across the city since late March.

However, European cities bucked the trend, recorded solid price growth in 2Q19 YoY, though the growth was muted when compared to 2017-18.

Berlin and Frankfurt were the only two cities out of the 46 to record double-digit price growth for luxury homes. Both cities benefited from a so-called catch-up trade because prices are lower compared to other European cities. Moscow is No. 3 on the list, saw luxury home prices jump 9.5% in 2Q19 YoY.

The downturn in luxury real estate worldwide comes as central banks are frantically dropping interest rates. The Federal Reserve cut rates 25bps for the first time since 2008 last month, along with Central banks in New Zealand, India and Thailand have all recently reduced rates.

The main takeaway from central banks easing points to a global downturn in growth, and resorting to sharp monetary policy action is the attempt to thwart a global recession that would ultimately correct luxury home prices.

“Sluggish economic growth explains the wave of interest rate cuts evident in the last three months as policymakers try to stimulate growth,” wrote Knight Frank in the report.

* * *

As for a composite of all global house prices, Refinitiv Datastream shows price trends started to weaken in 2018, and in some cases, completely reversed like in Australia.

House price growth for OECD countries shows the slowdown started in 2016, a similar move to the 2005 decline.

If it’s luxury real estate or less expensive homes, the trend in price has peaked and could reverse hard into the early 2020s.

Central banks are desperately lowering interest rates as the global economy turns down. Likely, the top is in, prepare for a bust cycle.

Source: ZeroHedge

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Jeffrey Epstein’s $56 Million Mansion Could Become a Real-Estate Nightmare

(Jeanette Settembre) Jeffrey Epstein lived in what’s reportedly one of the largest private homes in Manhattan, where he allegedly sexually abused under aged girls, an allegation so horrific, real-estate experts say people will go out of their way to avoid walking down the block.

Epstein has pleaded not guilty to the charges.

Epstein’s seven-story, 21,000-square-foot Upper East Side home near Central Park is reportedly valued at $56 million, and if the home ever hits the market again, the stigma from the financier’s alleged sex-trafficking scandal will likely diminish its worth.

“After an event like this occurs, and the public becomes aware of it, all of a sudden the value drops significantly,” real-estate appraiser Orell Anderson, who valued the homes where Nicole Brown Simpson and JonBenet Ramsey were murdered, told MarketWatch.

“When tragedy or crime occurs at a home, it could take years before it ever sells, even if it’s a high profile residence”

One might find what’s inside the mansion disturbing even without knowing the harrowing acts that occurred inside.The home is reportedly adorned with unsettling decor choices, like a female doll hanging from the chandelier, and a self-portrait Epstein reportedly commissioned of himself portrayed in a prison scene behind barbed wire in the middle of a corrections officer and a guard station, according to The New York Times. All of those adornments, of course, would be removed in lieu of any sale.

When tragedy or crime occurs at a home, it could take years before it ever sells, even if it’s a high profile residence. And when it does, the buyer usually gets a discount on it, and the market value could take years to bounce back, if it ever does, Anderson says.

Homes where something as extreme as a murder occurs can often decrease a property’s value by 25% because of physical damages to the house like blood stains, or the lingering smell of dead bodies, Anderson explains. Then there’s the stigma of living in a house where someone was killed, or a tragedy happened.

After O.J. Simpson’s former wife Nicole Brown Simpson and her 26-year-old friend Ron Goldman were found dead outside of her Brentwood home in 1994, Brown Simpson’s family tried to sell it, but no one wanted to buy a home where a double homicide occurred.

The house was on the market for two years before it finally sold for a fraction of what Brown Simpson paid for it. She purchased the home for $625,000 and it sold for $525,000, according to realtor.com. And in 1974 when Ronald DeFeo murdered an entire family in the “Amityville Horror House,” it sold for a $250,000 loss in 2017.

“The property in the short-term would take a significant hit to what its potential would be.”

New York City-based real-estate appraiser Jonathan Miller says even cursed homes see resiliency.

“Whenever there is a tragedy, generally speaking, at least in New York, the property in the short-term would take a significant hit to what its potential would be,” Miller explained.

He said Epstein’s Upper East Side mansion is especially unique because there’s only a handful like them on the block near Central Park. “I find that within a few years that generally fades away and even accelerates when you have a unique property or housing shortage.”

How to salvage and attempt to sell a cursed property

Once the dust settles after a tragedy, there are physical changes that can be made to present the property in a new light.

“It’s best to make the house look different from the pictures of it in the media so that people don’t immediately recognize it.” Anderson says, of changing the facade. “Put in more lights or change the color of the walls so there’s a perception that things have changed.”

That could mean investing in landscapers to add more plants to the front entrance to make it look more inviting, or changing the color of the home to make it appear brand new so perspective buyers don’t associate the property with it’s dark history.

However, real-estate agents are typically obliged to reveal the history of a house, especially if there were serious crimes committed there such as a murder, to a prospective buyer.

To boost the value of Simpson Brown’s home, it underwent a massive renovation and an address change so prospective buyers wouldn’t associate the condo with its past. It took more than a decade to bounce back selling for $1.72 million in 2006, according to realtor.com.

In the DeFeo murder home, granite counter tops, a heated sun room, fireplace and home sprinkler system were added likely to help boost the value in 2016 before it sold a year later.

Homes where tragedies occur can be redeveloped, turned into memorials or destroyed

Anderson says another way to restore a property that’s been plagued by crime or violence is to demolish it and rebuild something completely new, like turning a single-family mansion into an apartment building or office space depending on what zoning and land laws permit.

“If you had the kind of money, you could tear down the home and make it into something different,” Anderson said. In other cases, like an act of terrorism or a mass shooting, sometimes homes or the place where a tragedy occurred are destroyed all together, Anderson noted.

Some buyers hire energy healers to chase away evil spirits and bad vibes

When the DeFeo murder home first sold in 1975 after he was convicted, the buyers reportedly moved out nearly a month after they moved in because they allegedly heard voices telling them to “get out.” It could be worth getting an energy healer or spiritual leader to come in and cleanse the house, Anderson says, to put potential home owners at ease.

“If your market demands it, you could get your local priest or energy healer to come exercise the bad spirits. It might sound ridiculous, but that seems to be calming for people who believe in ghosts, or have superstitions,” Anderson says.

Source: By Jeanette Settembre | Realtor.com

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The Jeffrey Epstein Rabbit Hole Goes a Lot Deeper Than You’ve Been Told So Far

It seems like the whole Epstein thing was an elaborate professional blackmail operation intended to ensnare the rich and powerful. But who was really behind it, who was really bankrolling Epstein?

We really need to get to the bottom of this for all the right dominos fall.

Dubai Villa Prices Fall to Lowest Point in a Decade

The average villa is now trading for less than it did following the last global financial crisis

Newly constructed villas in Dubai. Chris Jackson / Getty Images

(Mansion Global) Dubai house prices plummeted to their lowest levels in over a decade last quarter, according to new data from U.A.E.-based property firm Cavendish Maxwell.

The average single-family home price sunk 24% over the past year to AED1.82 million (US$495,500), a level not seen in over 11 years despite a global recession and regional economic meltdowns over the past decade, according to data on website Property Monitor.

The average house, referred to locally as a villa, is now trading for less than it did during the darkest days of the global financial crisis and subsequent credit crunch, which hit Dubai the hardest in 2010-11. It’s also lower than at any point since oil prices crashed in 2015, according Property Monitor, which is powered by Cavendish Maxwell.

In June alone, the average home price—including both single-family houses and apartments—fell over 15% compared to a year ago, according to a report from Cavendish Maxwell on Thursday.

While the Dubai economy remains relatively robust, powered by nearly 8 million foreign expats who live and work in the city, nonstop building has created a glut of housing that’s prevented home values from appreciating in more than a decade.

Sprawling master-planned communities dotted with mansions have been hit the hardest.

“The annual decline in house prices was more pronounced in communities such as IMPZ, Arabian Ranches, Emirates Living, Discovery Garden and Dubai Silicon Oasis, where house prices declined by more than 16% on average,” said the firm in its report.

In the exclusive man-made island known as Palm Jumeirah, prices have slipped 14% over the past year. Even thriving Dubai Marina, which overlooks a port of luxury yachts, has seen average home prices slip 13.5% since June 2018, according to the report.

Source: by Beckie Strum | Mansion Global

Hunting For Ranches Like Penthouses Means Perks, Or Forget It

Source: T. Boone Pickens Family Office

(Bloomberg) — Buyers looking for the perfect luxury ranch, that billionaire’s take on American rural life, may have to hold out to get what they want.

Whether it’s sky-high in New York or in the Big Sky country of Montana, high-end properties seem to be hitting a soft patch: they’re harder to sell unless they come with an exclusivity where price matter less. But that means paying a premium for that perfect combination: from mountain views at sunset to proximity to well-stocked towns to wildlife or the cachet of neighbors.

While six of 38 ranches listed for sale at more than $10 million have been marked down in the past 90 days, there’s a limited supply of properties that cover the full range of features, according to Billings, Montana-based broker Hall and Hall.

“When you get all of those things working together, if you really want that, you have to pay up if it comes available,” said Hall and Hall managing director B Elfland, who goes by his first-name initial without a period.

That has some sellers betting that bigger is better. Morton Fleischer, chairman and co-founder of Store Capital Corp., is marketing his Arizona and Montana ranches together for $50 million. One selling point, he said by phone, is the millions poured into the area by GoDaddy Inc.’s billionaire founder Bob Parsons.

Private Jet, Horses

“If I was younger, I wouldn’t sell that ranch,” Fleischer, 82, said of his Scottsdale home. “It’s a good investment for someone.”

“I got out of the pressure cooker and could get on my horses,” he said. “Perhaps someone running a hedge fund who’s in their 40s and wants to live a lifestyle out west and has enough money to have a jet plane to get back and forth could do the same.’’

Nearly doubling the price to attract a buyer may seem counterintuitive. Take West Creek Ranch in Colorado, with no buyer since John Hendricks listed it for $149 million in 2017. Now the Discovery Channel founder is combining the offer with his guest resort and car museum down the road for $279 million, according to Sotheby’s International Realty.

Also on the market in Colorado for $46 million is Henry Kravis’s Westlands Ranch. Kravis has a net worth of $6.2 billion, according to the Bloomberg Billionaires index. Private-equity executive Charlie Gallagher is asking $36 million for his Elk Island Ranch.

Exclusive Market

That’s a far cry from what NFL and Premier League team owner Stan Kroenke paid in 2016 when he bought the W.T. Waggoner Estate Ranch in Texas listed for $725 million, which is bigger than New York city and Los Angeles combined. Kroenke has a net worth of $8 billion, according to the Bloomberg Billionaires index.

In Montana, “In each 2016 and 2017, there were only four sales $10 million and above,’’ said Hall and Hall broker David Johnson. “The next year, there were eight. It wasn’t a double in demand. It was a double in supply.”

Hall and Hall sold 16 ranches for more than $10 million in 2018, compared to six so far in 2019. While that may suggest a slowdown, ranch sales can’t be compared to the frenzy of big cities.

“Our market doesn’t have the dramatic swings that New York and California residential markets have,” said Elfland.

Owning a rural slice of heaven runs deep in the psyche of even the biggest victors of capitalism. Shining examples of the American Dream are the country’s biggest individual landowners, John Malone, who has a net worth of $8.6 billion, according to the Bloomberg Billionaires index, and Ted Turner, founder of CNN.

Life Timing

Buying a ranch can be a matter of timing, of having a job on autopilot and kids out of the house who want to visit.

“The clock is running, so if they’re going to enjoy it, it’s an incentive to pay a premium,” said Johnson.

When the kids stop visiting, it can be sad.

“We sold one last year that had been on the market for 10 years,’’ he said. “The price had come down by two thirds to where the buyer would pick it up.’’

Source: by Hailey Waller | Bloomberg News

Mansion Bust: Hamptons Estate Sells For 46% Discount

Arbor Realty Trust CEO and president Ivan Kaufman just bought a 58-acre estate in the Hamptons for $35 million — about HALF of its $75 million asking price from 2003 and about $14 million less than its most recent asking price, reported the New York Post.

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The estate in Bridgehampton, called Three Ponds Farm, features an 18-hole golf course, a large pool, several gardens, a tennis court, and ponds.

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The estate was first listed in 2003 with an asking price of $75 million. Then in 2007, listed again for $68 million. It was relisted back in December 2018 for $49 million.

https://www.zerohedge.com/s3/files/inline-images/three%20pond%20inside.jpg?itok=aEXjv0Xe

Down the street, the 42-acre Jule Pond estate in Southampton was slashed by $30 million for an asking price around $145 million instead of $175 million.

The developments of the deteriorating Hamptons mansion market comes at a time when luxury real estate across the North East is under structural stress.

Several months ago, we reported about the housing crisis developing between Manhattan, Greenwich, and the Hamptons.

The median sale price of a Hamptons home has fallen to a seven-year low of $860,000, according to our report.

Some of the real estate slowdowns can be connected to President Trump’s federal tax reform, which makes it more expensive to own estates.

Across all price levels, sales in the Hamptons have declined five straight quarters. This has led to an overall decline in the median sale price of homes, down 5.5% in 1Q19 versus the same period a year ago. About 300 homes changed hands in last quarter, was the lowest sales transactions in many years.

The wealth of the Hamptons real-estate market is closely correlated with those of nearby Manhattan, another real estate market that is quickly cooling.

Source: ZeroHedge

Developers Are Pulling Out All The Stops Amid Los Angeles’ Mega-Mansion Glut

Builders and brokers are throwing blowout bashes and testing an array of marketing stunts amid the area’s spec home bubble

(WSJ) Heavy duty vehicles line both sides of many of the winding two-way streets in the Hollywood Hills, making them treacherous single-lane thoroughfares. Construction workers wave stop signs as trucks laden with glass and steel back slowly out of driveways. Empty parcels of land all over Los Angeles’s poshest neighborhoods are being transformed into lavish mansions with price tags in the tens, or even hundreds, of millions.

“Every time I drive up there for any reason, if I return without getting my car dinged I breathe a sigh of relief,” says Andy Butler, a real-estate marketing consultant.

Real-estate experts estimate that there are about 50 ultra high-end spec houses under construction in the area, from Beverly Hills to Bel-Air and Brentwood.

The unprecedented wave of development has its roots in the heady days of 2014 and 2015, when foreign buyers poured into Los Angeles and luxury markets across the country logged record sales. A couple of local megawatt deals—including the $70 million sale of a Beverly Hills compound to billionaire Minecraft creator Markus Persson in 2014—inspired the construction of bigger and pricier homes, most of which were built as contemporary cubes. Some were built by inexperienced developers; many had price tags north of $20 million.

Now, there are simply too many, and not enough buyers to go around. “It’s created its own monster,” says Stephen Shapiro of Westside Estate Agency. “We have an enormous oversupply of these white boxes. There’s years of inventory out there.”

This Bel-Air home shaped like an airplane propeller is asking $56 million. A rendering of the home. Matthew Momberger

A review of the Los Angeles multiple listings service shows close to 100 homes on the market asking over $20 million in Los Angeles County, at least 35 of which could be classified as spec homes, and more are under construction. And those are just the listed ones: Appraiser Jonathan Miller says more than a third of homes in that price category are never entered in the MLS. Some of the city’s most expensive are notably absent.

The surplus mirrors a similar situation in New York, where high-end developers rushed to build pricey condos amid a market upswing, and are now faced with enormous competition for buyers.

But unlike New York, smaller, private lenders and wealthy individuals have provided much of the financing for the Los Angeles spec homes.

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Don Hankey, a California businessman known as the king of subprime car loans, says one of his companies has provided close to $300 million on high-end homes in the Los Angeles market, including on spec homes. Public records show Hankey Capital provided about $82.5 million in financing to “The One,” an almost-built megamansion by Los Angeles developer Nile Niami, who plans to list it for $500 million.

That asking price is more than twice the record paid for a home in the U.S., a record set earlier this year by hedge funder Ken Griffin’s purchase of a nearly $240 million penthouse in New York. The record price for a Los Angeles area home was set by the $110 million sale of a Malibu mansion in 2018.

“You have to be concerned,” Mr. Hankey says of the oversupply. “We’ve cut back. We’re not as aggressive in the financing.”

Other lenders on pricey spec homes include Axos Bank, formerly Bank of Internet, which financed a massive $180 million monolith built by plastic surgeon and newbie developer Raj Kanodia.

The debt load for developers can be substantial. “If I’m living in my house and I put it on the market for sale, I’m still living in my house,” Mr. Shapiro says. “These are empty houses, and the developer is spending a lot every month to keep them.”

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Andy Warhol’s 1974, two-toned, Rolls-Royce Shadow can be included in the deal for a new Trousdale spec home that’s branded around the artist. Photo: Darren Asay

In this environment, and amid signs that prices are falling, developers and their agents are going to extraordinary lengths to differentiate their listings from the pack. They are throwing themed bashes in lieu of traditional open houses, thinking up gimmicky new amenities and hiring marketing experts to reimagine homes as individual brands with their own names, logos and stories. Some developers are relisting plots of land, hoping to get their money out without sinking more money into construction.

“People come to us because they want to stand out,” says Alexander Ali, whose marketing and public relations firm the Society Group is finding a growing business in creating brands for megamansions. “There are so many new homes coming to the market every day.”

Mr. Ali’s latest exercise: Turning a roughly 7,600-square-foot contemporary home in Trousdale into “WARHOL 90210,” a property branded around artist Andy Warhol. Mr. Ali and the developer, Wystein Opportunity Fund, joined with a local gallery to display Warhol prints in the home. At a Warhol-themed disco to be held on site, a Warhol look-alike will be filmed striding through the party; the resulting video will be blasted out on social media. (The house has no connection to Mr. Warhol.)

Amid a surplus of luxury spec homes, developers and their agents are going to extraordinary lengths to differentiate their listings from the pack, like throwing themed bashes in lieu of traditional open houses. Photo: Joshua Bobrove

David Parnes, Mauricio Umansky and James Harris of The Agency, which threw the party. Photo: Joshua Bobrove

Mr. Ali convinced the agent that Mr. Warhol’s onetime car—a 1974, two-toned, Rolls-Royce Shadow—and the Warhol prints featured in the home should be included in the deal. “It defines the house as a collector’s dream,” Mr. Ali says. The whole package seeks $17.75 million. The house can be sold separately for $15.625 million.

In February, Mr. Niami threw an elaborate party inspired by Dutch artist Hieronymus Bosch’s painting “The Garden of Earthly Delights” in a home he is listing for $39.995 million. Its three levels were organized into heaven, earth and hell, and models in colorful tulle dresses swam in the property’s glass bottomed pool, said Mr. Ali, who organized the party.

There were actors posing as Adam and Eve while hosting a virtual reality game that allowed guests to enter a rendition of the Bosch painting. People drank whiskey infused with the body of a dead cobra, and dancing women dressed in leather, whips and chains. A camel stood at the entrance to greet guests.

Another performer floated on the surface of the pool in a transparent bubble. Photo: Joshua Bobrove

In Bel-Air, real-estate brokerage firm the Agency recently threw a “Great Gatsby” themed event to launch a $35.5 million spec house. A female performer in a bedazzled costume hung upside down from a trapeze to pour champagne for guests, while another floated on the pool in a transparent bubble.

Mr. Ali says developers will pay anywhere from $20,000 to hundreds of thousands to throw such events.

In addition to the parties, developers are always on the hunt for creative new amenities. “It’s about the wow factor,” says spec home developer Ramtin Ray Nosrati, whose under-construction mansion in Brentwood includes a secret room for growing and smoking marijuana.

The ventilated room, accessed by hitting a button hidden inside a living room bookcase, will have tinted windows that darken for privacy. The house, slated to ask between $30 million and $40 million, will also come with a budget for an employee to supervise growing and harvesting. Mr. Nosrati compared the amenity to “having your own vineyard.”

Despite all this, price cuts are the order of the day. Bruce Makowsky, a handbag designer-turned-developer who sold the Minecraft property, lowered the price of his latest project, a lavish Bel-Air house with a candy room and a helipad, to $150 million, down from its original $250 million asking price. Mr. Niami slashed the price of a sprawling 20,500-square-foot house known as Opus to $59.995 million, down from $100 million.

Developer Ario Fakheri has chopped the asking price for his Hollywood Hills home with a roughly 300-gallon indoor shark tank to $26.995 million from $35 million.

Sales are still happening: Approximately 11 deals have closed for more than $20 million in Los Angeles so far this year, and a Saudi buyer recently paid $45 million for a spec home built by diamond manufacturer Rafael Zakaria. But buyers know they have the upper hand. “People are making lowball offers,” says Mr. Shapiro of Westside Estate Agency. “They’re not being shy.”

Doug Barnes, the founder of Eyemart Express, sold a contemporary home in Beverly Hills for $34.65 million in April, or nearly 40% off its original $55 million asking price, records show. British restaurateur and Soho House co-owner Richard Caring is listing a home he bought in Beverly Hills for $29.995 million; he paid $33 million for it in 2016, records show.

As for “The One,” the $500 million property was originally slated to come on the market in 2017 but has yet to be listed. The developer blamed construction delays.

Corrections & Amplifications: Stephen Shapiro of Westside Estate Agency said buyers know they have the upper hand in negotiations to purchase high-end spec homes. An earlier version of this article incorrectly stated that sellers have the upper hand. (May 30, 2019)

Appeared in the May 31, 2019, print edition as ‘The Spec Home Bubble.’

Source: by Katherine Clarke | The Wall Street Journal via @kathieClarkeNYC

World’s Wealthy Packing Up And Moving As Tensions And Taxes Take Toll

Rich people are picking up sticks and getting out of dodge, according to Johannesburg-based research firm New World Wealth, which notes that around 108,000 millionaires migrated across borders in 2018 – a 14% increase over 2017 and more than double the level in 2013. 

The top destinations? Australia, the United States and Canada, reports Bloomberg. Around 3,000 of the millionaires left the UK last year – with Brexit and taxes cited as possible motivations.

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Present conditions such as crime, lack of business opportunities or religious tensions are key factors, according to the report – which can also serve as key future indicators according to Andrew Amoils, New World Wealth’s head of research. 

“It can be a sign of bad things to come as high-net-worth individuals are often the first people to leave — they have the means to leave unlike middle-class citizens,” says Amoils. 

Top destinations

According to New World’s report, Australia tops most “wish lists” for immigrants due to its perceived safety (deadly bugs and animals aside, we assume). There is also no inheritance tax down under, and the country has strong business ties to Japan, China and South Korea. Moreover, Australia “also stands out for its sustained growth, having escaped the financial crisis largely unscathed and avoided recessions for the past 27 years,” according to Bloomberg

The second most popular country was the United States – and in particular the cities of Los Angeles, New York, Miami and the San Francisco Bay as preferred options. 

Fleeing China and India

Due to China’s strict regulations on capital outflows in recent years, many of the country’s wealthy are subject to hefty taxes. In response, assets are shifting as rich Asians move to more developed countries.

The outflow of high-net worth individuals from China and India isn’t particularly concerning from an economic standpoint as far more new millionaires are being created there than are leaving, New World Wealth said.

“Once the standard of living in these countries improves, we expect several wealthy people to move back,” Amoils said. –Bloomberg

Turkey, meanwhile, lost 4,000 millionaires last year – the third straight year of losses, while around 7,000 Russian millionaires have left the country amid crippling sanctions related to the annexation of Crimea. 

Source: ZeroHedge