Five reasons why ultra-high net worth individuals are investing in real estate
A new report, Around the World in Dollars and Cents, from real estate adviser Savills and Wealth-X has shown that European UHNWIs hold the biggest share of privately-owned real estate.
Wealth-X, a provider of intelligence on ultra-high net worth individuals (UHNWI – defined as those with net assets of US$30 million and above), has partnered with Savills and reports that European UHNWIs have 31% of their wealth in real estate while Asians have 27%.
According to the report, the importance of private wealth in large real estate transactions is greater than ever. In fact, it has grown almost threefold since 2009, says Savills.
The ever-increasing interest in real estate from HNWIs and UHNWIs has made a significant impact on Home Hunts’ activity throughout January, which has seen 46% more enquiries across France in January 2014 than in 2013.
“January is traditionally one of the quietest months of the year for our business but 2014 seems to be bucking the trend,” said Tim Swannie, Co-Director of Home Hunts.
“Around 95% of our clients are overseas buyers and we have had record numbers of visits this year. The deciding factors for many clients at present, apart from house prices, are the fantastic interest rates being offered by the banks and the excellent exchange rates that are available.”
But why are so many UHNWIs currently investing into real estate?
1) Real estate, especially a private residences, is still an important status symbol.
Savills states that a “global real estate market” has emerged among UHNWIs and many of these are “worldwide players in their hunt for a business base as well as investments in residences and second homes”.
The impact of this on the real estate market is substantial – thus luxury property in France, for example an apartment in the 6th arrondissement of Paris, is more sought after than ever.
2) Private wealth is a major player in significant global real estate transactions.
“Private wealth has become increasingly important in large real estate transactions globally and has grown nearly threefold since 2009,” says the report. In this context private investment deals mean private-funded property companies and REITS.
According to Savills, private wealth now has a commercial edge and is “the lead form of finance being used in over half of all the world’s biggest property transactions – each worth at least US$10 million”.
3) The UHNWIs investing in real estate are worth “twice that of their non-real estate counterparts”.
According to the report, while only 5.4% of UHNWIs made their money mainly from real estate, on average they are worth twice that of those that have invested in other areas.
With France’s Côte d’Azur recently confirmed as the world’s most desirable location, this area is home to some of the most lucrative property investments in the world.
4) UHNWIs are astute about the value of residential property in their region of origin.
“The highest levels of UHNWI residential property ownership are in regions from which individuals originated,” states the report, which, it concludes, indicates that HNWIs “prefer to invest in what they know”.
With Europe at US$2.4 trillion and Asia at US$1.8 trillion these are the top two regions for residential property ownership it the world.
5) The greatest Private Asian wealth comes from real estate.
Savills and Wealth-X reported that around 7% of all UHNWIs in Asia have “made their fortunes” from real estate. Asians UHNWIs are the most successful nationality at making money from real estate.
Data shows that the “average total wealth of those making money from real estate in Asia is US$160 million”.
To discuss more of the current benefits of investment in real estate, contact Home Hunts directly on +33 (0)970 44 66 43 (French office) or +44 (0)208 144 5501 (London office). To view residences in prime market areas, go to www.home-hunts.com
