Where (and why) the super-rich are investing in real estate Land ownership is, perhaps, the most ancient expression of wealth. Throughout history it has provoked conflict and inspired grandeur, from civic monuments and sacred spaces to egotistical towers and pleasure palaces. Today the relationship between land – or property – and wealth is more complex and more commercial than ever before. Since the economic crisis of 2008, real estate has attracted many of the world’s super-rich who have sought a safe haven, and a means of diversifying assets, and a very visual symbol of power and sophistication. In 2008, $146bn of global private wealth was invested in the large-deal (above $10m) real estate market and by 2012 this had increased by 111 per cent to $308bn. Meanwhile, corporate investment in the same sector rose by only 43 per cent to $594bn over the same period. These figures, detailed in a new report by Savills in partnership with Wealth-X, a Singapore-based consultancy, reveal the increasing importance of private investment in the world of property. According to Knight Frank, the number of high net worth individuals (HNWI, defined as those with net assets of at least $30m) increased by 35.6 per cent between 2007 and 2012, and they have demonstrated a keen interest in property. The Savills report states that 28 per cent of wealth held by Asian ultra high net worth individuals (UHNWI, also defined as those with net assets of at least $30m) is in the real estate industry, compared with 8 per cent of wealth held by UHNW Europeans and 6 per cent of wealth held by UHNW North Americans. Consequently, a growing proportion of Asian wealth is now being channelled into direct property holdings and trophy homes. The report divides Chinese overseas investors into three waves: the first, those buying homes in countries where they have business interests; the second, those buying for their offspring or to secure permanent residency; and a predicted third wave looking to buy property in an ever wider range of locations. It is certainly worth considering the huge potential for growth in the Chinese market, and Asian buyers more generally, but these expectations are based on an assumption that the spending power of Asian UHNWI will continue to increase, and that the tastes of these buyers will broaden as their wealth matures. In recent years, Asian buyers have made an impact on cities around the world, with Hong Kong, Singapore, Mumbai and London among the top locations for residential investment. Newly wealthy in mainland China, for example, prioritise security and investment diversification, so will tend to buy second homes in established “global cities” before they look at holiday homes. A report by Wealth-X and UBS published in September last year notes that although the number of UHNWI in Asia rose from 42,895 to 44,505 in 2013, in China numbers fell from 11,245 to 10,675. Meanwhile, as old-world economies begin to show signs of recovery, the UHNW population has increased by 5,225 and 4,625 in the US and Europe respectively. “In 2013 we started to see this in London, where the ultra-prime market is still growing but at a slower rate than some other prime markets,” says Barnes. “That’s a very strong indication that it’s beginning to be London-generated wealth rather than overseas-generated wealth, or high-end-generated wealth, that is feeding the market and I think that’s going to be a pretty powerful force and factor in 2014.” Should this be taken to mean a more even distribution of wealth over the coming years, a slight sapping of power from the super-rich, it is perhaps necessary to end with this sobering thought: Wealth-X predicts that in 2020 the world’s population of UHNWI will exceed 260,000. Their combined wealth? More than $40tn.
Posted on: Sun, 26 Jan 2014 23:37:58 +0000
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