The inaugural Wealth-X and Sotheby’s International Realty Global Luxury Residential Real Estate Report has recently been published. The report looks at trends in the Ultra High Net Worth (“UHNW”) population’s ownership of the world’s luxury residential real estate. It also examines the attitudes, behaviours and locations that are important to the luxury property sector.
What does the report reveal?
One of the report’s core predictions is of little surprise when one considers the wealth that now emanates from Asia. The experts agree that the ongoing shift in wealth from the West to the East and the growing significance of intergenerational wealth transfers will be two of the most significant influences on the luxury residential real estate market.
The report identifies much about the UHNW’s attitude to property buying. Property is a unique investment as it can be something quite personal that is used and loved on a daily basis by the investor. Therefore, luxury residential property can be at the heart of the ultra affluent’s everyday life as it sits in the middle of both their lifestyle and investments. So, sometimes the sacred rule of investment is broken and hearts do rule heads if there is a property which they simply must own.
It appears from the findings that UHNW individuals believe an investment in residential property is one of the best vehicles for building long-term wealth. Each year, more and more of the ultra affluent are realising this. In fact, last year witnessed a 2% growth in the percentage of the world’s UHNW population who make their wealth through real estate.
On average UHNW individuals own 2.7 residencies and last year saw an 8% rise in the value of UHNW-owned residential real estate assets. Who are the people who own these assets? Well, the statistics show that investment properties are more attractive to ultra affluent women in comparison to their male counterparts as they hold almost double of the net worth in such assets compared to men. It also appears that luxury residential real estate is an asset class favoured by those with inherited wealth. These individuals hold almost double the net worth in such assets compared to self-made UHNW individuals.
Influence on global property markets
Billionaires change one of their four properties, approximately, once every three years. Whilst UHNW individuals with net worth between US$30 million and US$50 million usually keep their primary residences for over fifteen years and their secondary residences for over ten years. Of these residences, the secondary abodes are, on average, 45% more valuable than their primary counterparts.
Over 6% of the world’s UHNW population now primarily resides in a different country to where they were born. However, such individuals usually own a secondary residence in their home country and India leads the way in this respect. Not surprisingly, Monaco has the highest density of foreign owned UHNW residences; such assets totaling 83% of UHNW residences on the principality.
What is obvious from the report is that the UHNW population plays a major role in property markets around the world. For them, investing in the luxury real estate sector is not a passing trend but is, in fact, gaining momentum each year. The growing wealth of Eastern investors is fueling this momentum and it will be fascinating to see next year’s report’s findings as to the influence they will have had on the UK property market and global market in 2015.