Like many countries around the world, the real estate market in Spain has been hit hard by the current financial crisis.  It is estimated that there are as many as 1.2 million new homes sitting on the market unsold, many of which have yet to be completed.  In some spots that are more popular for those purchasing vacation homes, including the Costa del Sol region, the market peaked as early as 2004.  Recent months have seen a significant wave of foreclosures, with more expected to follow.

However, the luxury home market in Spain hasn’t seen as dramatic an impact as other segments of the market.  It is estimated that these homes have only dropped 15% to 25% of their value since they hit their peak.  This includes more unusual homes or those that have a unique historical appeal.  It is likely that the prices have held up better because wealthier buyers aren’t as dependant on financing. Many of these sellers are also more likely to be able to hold onto the properties until the market improves.

The amount of money that you’ll have to shell out for truly luxurious real estate depends largely on where you happen to be.  This should be a surprise for very few — as the old saying goes, location is everything when it comes to property.

For the second year in a row, the most expensive location in the world is the city of Monte Carlo.  The average price for housing in the city is around $4,420 per square foot.  This comes as no surprise to the publisher of globalpropertyguide.com, the firm that provided the report.  Monte Carlo is a favorite location of the rich because it is one of the best tax shelters in the world.  When you add in the fact that the city is small and space is limited, the exorbitant prices make much more sense.

Still, the fact that the average price of housing in Monte Carlo is more than that of the second and third cities on the list combined (an average of $1,937 per square foot for Moscow and $1,928 per square foot for London) is an impressive achievement. Also surprising is the fact that New York dropped from the second spot to the sixth spot in the course of a year.  This is primarily due to growth in the Asian real estate markets.