Ultra-rich Asians are keeping more of their wealth – up to 27% – in real estate assets according to a report which highlights how private wealth is increasingly shaping the world’s real estate markets.
Real
estate now accounts for around a fifth of the invested wealth of the
nearly 200,000 ultra-high-net-worth individuals (UHNWIs) in the world,
according to analysis from real estate advisor Savills, in association
with Wealth-X, the world’s leading UHNW intelligence provider.
In its Around the World in Dollars and Cents
report, Savills estimated that the total value of the world’s real
estate is now around US$180 trillion, some 72 percent of which is owner-occupied residential property.
Of the US$70 trillion that is ‘investable’ and therefore traded regularly – including US$20 trillion of commercial property
– over half is being bought by private individuals, companies and
organisations. Investing institutions, listed companies and publicly
owned entities are becoming relatively less important to world real
estate as a result.
Around 3 percent, or US$5.3 trillion, of
the world’s total real estate value is owned by UHNWIs. This wealthiest
0.003 percent of the world’s population has real estate holdings which
are worth an average of US$26.5 million each.
“Global real
estate is mostly residential and held by occupiers, but private owners
are becoming more important in the world of traded investable property,”
said Yolande Barnes, Head of Savills World Research.
“Since
the ‘North Atlantic debt crisis’ of 2008, sovereign wealth funds,
wealth management companies, private banks and family offices have
stepped into the property deals that corporate bankers have deserted.”
She
added that in the world’s leading cities, the willingness of private
wealth to take the place of debt finance or to take a higher-risk
development position is now making the difference between deals done or
schemes mothballed.
Savills estimates that around 35 per cent (or
6,200) of global big ticket (less than US$10 million) deals in 2012 were
only possible because of private funding.
Mykolas D. Rambus, Chief Executive Officer of Wealth-X, confirmed the growing importance of private wealth.
He
said: “We forecast that the UHNW population will grow by 22 per cent by
2018, its combined wealth – currently US$27.8 trillion – is expected to
total over US$36 trillion by 2018. This presents huge opportunities for
those involved in global real estate investment to create the right
product in the right locations.”
European and Asian UHNWIs hold by far the biggest share of all privately owned real estate,
together accounting for almost 80 per cent by value. European UHNWIs
hold 31 per cent of their wealth in real estate and Asians 27 per cent,
with a total value of around US$4.2 trillion, according to Savills.
European
real estate markets are the largest and most international, having
attracted the most global inward investment, relative to size, with London the standout global destination for private inward real estate investment from virtually every corner of the globe.
“In
recent years there has been a tendency for UHNWIs to focus on ‘safe
haven’, trophy properties for capital growth and wealth preservation,”
said Barnes.
“In future, we anticipate that some will begin to seek more productive, long-term income-producing positions.
“UHNWIs
will be competing more directly with institutional investors in future
but, being more opportunistic and less constrained by formal criteria,
are more likely to become pathfinders and pioneers than corporate
investors are.”
Andrew Batt, International Group Editor of PropertyGuru Group,
wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
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