Super rich return to real estate
Bricks and mortar account for 33% of investment portfolios
DEMAND FOR TROPHY HOMES in global hot spots such as London, New York, Monaco, the Côte D’Azur and Hong Kong is booming again as super rich investors take advantage of softer prices to increase their exposure to real estate. That’s one of the trends highlighted in the recently released Wealth Report 2010, an annual collaboration between British-based property group Knight Frank and Citi Private Bank UK. The survey offers interesting insight about high net worth individuals’ (HNWIs) attitude towards property as an asset class.
The report shows residential property is currently the most popular asset class among wealthy investors, with real estate accounting for one third (33%) of the investment portfolios of HNWIs worldwide. Equities make up 25% of HNWIs investments, with cash and bonds lagging at 17% and 13% respectively. Gold claims just a 0,5% share of the average HNWI’s investment portfolio.
David Poole, head of Citi Private Bank UK, says the tangible and straightforward nature of residential property – especially at a time when the outlook for other asset classes is uncertain – explains the renewed attraction to real estate. He says property is clearly viewed as a strategic investment that can ride out economic cycles. In addition, falling house prices on the back of the global recession has created prime property opportunities for mega-rich buyers.
Says Poole: “Our clients look for opportunities when everyone else is circling the wagons. Buying becomes opportunistic in a downturn, particularly as people turn to hard assets such as property when other assets experience dislocation.’’ Poole says rock-bottom interest rates and the “creation” of cheap money via government stimulus packages have also supported moneyflow back into property. At the same time, low savings rates have encouraged the wealthy to move investments out of cash and into property in search of better yields. That’s starting to drive demand and values upward in many areas.
Liam Bailey, head of residential research at Knight Frank, agrees drops in prices in a number of property markets last year are being viewed by wealthy investors as a buying opportunity. But Bailey warns historic house price data