Hollywood bust as celebrities feel the credit crunch
Even A-listers are feeling the effects of falling house prices
John Harlow
Dido may be able to play the piano and the violin, but coping with the Hollywood property market has meant a little fine-tuning for the mistress of hotel-foyer melodies. The 36-year-old British singer has become the latest celebrity to take a hit as high-end houses in America show signs of falling prey to the sub-prime mortgage crisis.
Until recently, mega-rich homeowners felt themselves immune to the trouble afflicting those who Leona Helmsley, the late billionaire property investor, liked to call “the little people”. Yet a survey for The Sunday Times conducted by Zillow.com, a website that tracks house prices in America, has found that reality has begun to catch up with the cost of property even in the smartest postcodes.
Dido – who sold more than 13m copies of her debut album, No Angel, after the rapper Eminem sampled one of her tracks on his single Stan – had her three-bedroom bungalow in Los Angeles on the market with Sotheby’s International Realty for months. The 1950s property on Oriole Way, an upmarket area of the Hollywood Hills known as the “bird streets”, has views of the Pacific Ocean, along with a pool, a spa, a media room and a marble bathroom decorated in the art-deco style that Angelinos call “Hollywood Regency”. Despite all this grandeur, Dido, who bought the house in September 2005 for an undisclosed sum, has accepted an offer of $4.45m (£2.3m) – $150,000 less than the asking price.
She is not the only celebrity swallowing her pride and banking the cheque. Frankie Muniz, 23, star of the popular American sitcom Malcolm in the Middle, has slashed the price of his five-bedroom home in the Hollywood Hills by $185,000 to $3.69m: little more than what he paid in January 2006.
On the East Coast, in Manhattan, Scarlett Johansson, 23, has sold her fashionable TriBeCa loft for $52,000 less than the $1.95m she paid for it two years ago. And Kathleen Turner, 53, has reduced the price of her estate in the Hamptons, Long Island, from $7.95m to $5.88m.
Turner, who bought the six-bedroom house in the hamlet of Amagansett for $488,000 in 1990, has fared better than more recent investors. In the first three months of this year, American banks launched repossession proceedings against a record 120 homeowners in the Hamptons, traditionally the summer colony of wealthy New Yorkers. These were no dodgy sub-prime deals: figures from Long Island’s Suffolk County clerk’s office show 20% of those homes are worth more than $1m. A further 800 households in the area have been flagged by credit-monitoring companies this year because of late payments. The new delinquent borrowers are young Wall Street hedge-funders, high-earning lawyers and speculators exposed by the credit crunch, according to John Brady of the local estate agent Coldwell Banker. “This problem didn’t exist before,” he explains. “Now you expect to see new [properties on the list] every week.”
It seems that, although the top end of the market withstood the first shockwaves of the sub-prime market, the rich are now suffering too. “Higher-valued houses were outperforming cheaper properties in nearly half of the top areas,” says Stan Humphries, vice-chairman of data at Zillow.com, which produced the figures based on local market conditions. “Now this lead is starting to slip.”
Even those who aren’t selling may be losing money. According to the report, the heiress Paris Hilton’s pad in Beverly Hills, which she bought for $6m last summer, is losing $64,500 a month in value. At least Hilton is doing better than Sharon Stone – the report found that the value of the 50-year-old actress’s home in the Hills plunged by $740,000 in March alone.
What is more, the high end of the LA market is facing pressure because of the prospect of an actors’ strike next month. The recent writers’ strike is estimated to have cost $1 billion in lost revenue. How much money can drain out of the city before even the rich start to flee like rats?
The biggest loser, however, may turn out to be Michael Jackson. Before his recent financial troubles, his Neverland Ranch, north of Los Angeles, was valued at up to $120m. This month, debt-collecting auctioneers set the reserve price at about $20m. Luckily for Jackson, 49, a finance group moonwalked in at the last moment with a loan purchase deal, in the hope that the former king of pop can sell when the market recovers.
Fellow celebrities and hedge-funders alike must surely be praying that Neverland does not live up to its name.
