Villa in Nice is world's most expensive house

The Villa Léopolda, one of the most sumptuous and legendary estates on the Côte d'Azur, has been sold to a Russian billionaire for €500m (£390m), smashing the record for the most expensive house in the world.

The cream-coloured villa, set in 20 acres of gardens overlooking Cap Ferrat, near Villefranche-sur-Mer, was originally built for King Leopold II of Belgium.

Its new owner is said to be a Russian oil oligarch but not – despite rumours on the internet – Roman Abramovich, the owner of Chelsea FC, who already owns a €100m mansion near Antibes.

According to the Nice-Matin newspaper a contract was signed last week to transfer ownership of the villa from Lily Safra, the widow of Edmond Safra, the Lebanese-Jewish banking billionaire who was murdered by his male nurse in Monaco in 1999. The new owner, who will take possession next month, is reported by a property lawyer in Nice to be a Russian billionaire who wishes to remain anonymous.

The price paid for the sprawling estate, which once belonged to the Agnelli family, founders of Fiat, has caused a flutter of excitement – and even disgust – on the French Mediterranean coast.

The new Russian super-rich have been jostling one another to buy large properties on the Côte d'Azur in recent years but previous sale prices have never exceeded €200m. The highest house price officially recorded is the £100m paid by the Indian steel magnate Lakshmi Mittal for a mansion in Kensington Palace Gardens last year. The unnamed Russian billionaire has paid almost four times as much for the Villa Léopolda.

The price is said to reflect Mme Safra's initial unwillingness to sell and the determination of the Russian super-rich to be seen to be paying stratospheric amounts for holiday homes in the south of France.

"It has become surreal," one estate agent told the newspaper Le Parisien. "You daren't offer these people a house which costs less than €100m or they boot you out... and not very politely."

King Leopold II, who built a fortune from the brutal exploitation of Congo as a "private estate", owned almost all the land at Cap Ferrat at the end of the 19th century. In 1902, he bought an extra 20 acres of scrubland just above the sea at Villefranche-sur-Mer for a nominal one franc. On this spot, then regarded as unfashionable, he built the Villa Léopolda as a summer retreat.

In 1916, his nephew and heir, King Albert I, turned the villa into a hospital for officers wounded during the First World War.

It later passed into the hands of the Agnelli family and became the scene for legendary jet-set parties in the 1960s, attended by, amongst others, Frank Sinatra and Ronald Reagan. The grounds are regarded as the most spectacular on the Côte d'Azur: 50 full-time gardeners look after 20 acres of gardens and terraces, planted with 1,200 olive, orange, lemon and cypress trees.

The villa, midway between Monaco and Nice, looks across the Villefranche bay at Cap Ferrat, which has become one of the world's most sought-after pieces of real estate. Nice-Matin, citing legal sources, said that 60 of the villas or mansions on Cap Ferrat are now owned by Russians.

Villa Léopolda has been rumoured to be on, and off, the market ever since Edmond Safra's murder. Lily Safra, was rumoured to have sold the villa to Bill Gates, the Microsoft founder, for €75m three years ago but the reports came to nothing.