Su­per rich re­turn to real es­tate

Bricks and mor­tar ac­count for 33% of in­vest­ment port­fo­lios

Finweek English Edition - - Front Page -

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

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