The total wealth of these individuals is US$1.8 trillion and their average holdings US$610 million each. This compares to an average holding by all global UHNWIs generally of US$139 million.
So Asian markets appear to be the most lucrative in which to create a real estate fortune, and the average age of UHNWIs is younger at 55.
WHO BUYS WHAT, WHERE
Not only has the participation of private sector investment increased, but the importance of certain global regions in real estate has increased too In 2007, Asian participation in big-ticket commercial real estate deals was 22% of the market by value. Since 2010, it has averaged 50%. Most of this increase has been from the private wealth sector. At least 45% of all big-ticket real estate deals in Asia were made by private individuals and private companies.
It is perhaps unsurprising that the participation of private Asian wealth has been so great in real estate of late. Around 7% of all UHNWIs in the region made their fortunes from the sector.
This is a higher proportion than in any other global region apart from Oceania.
Asian UHNWIs have made more money from real estate than other nationalities. The average total wealth of those making money from real estate in Asia is US$610 million.
Most UHNWIs direct property holdings are homes (including multiple second homes). North Americans have overwhelmingly invested in this type of property and Asians too are similarly conservative in their direct property holdings. Other types of property are more likely to be held in companies and other investing vehicles than held directly.
Other nationalities have more significant direct holdings (up to 20%) of other types of property. Europeans and Oceanians are more likely to hold farms, estates, ranches. Likewise Africans will hold land: rural, resort or urban, in direct ownership and Latin Americans will hold commercial property directly. Middle Easterners seem to have around 17% of their directly owned property in a well-balanced mix of real asset types. It also has the highest
average value at over US$35 million, while North American holdings are much lower in value, averaging US$5 million.
Most holders of direct real estate are more likely to own it in their home region than anywhere else – this is overwhelmingly the case for North Americans. Latin Americans, on the other hand, are exceptional in eschewing their homeland in favour of direct holdings north of the border.
Africans are the next most likely to invest somewhere other than their home territory and when they do they favour European destinations. Asians,
Europeans and Oceanians are all most likely to buy in North America than any other global region when investing overseas, followed by Europe. There
would therefore seem to be a preference for “safe haven”, old world destinations for direct real estate holdings among UHNWIs.
The overall value of direct property holdings is highest in Europe, partly due to the number of investors, but also due to high average values in the region.
The number of Asian UHNWIs with direct property holdings is smaller, even though the average value is higher.
With the importance of private wealth growing in all areas of real estate investment, we believe that understanding the geography and preferences in the residential sector can shed light on UHNWI investment behavior in other sectors too.
The map above shows the major locations around the world favoured by UHNWI buyers of residential real estate. It highlights not only where they like to live but also the geographies and jurisdictions that they might favour for other types of real estate holdings ― and other investments ― as well.
Most notably, when it comes to residencies, UHNWIs may invest crossborder but they will tend to stick to destinations within their global region, to areas they call “home”. North Americans are the most loving of their home nation and overwhelmingly favour
the US. Latin Americans are similar but will also venture northwards to cover the entire American continent, including the Caribbean.
Africans, Asians and those from the Middle East are also concentrated in their own regions but Europeans are a little more widely dispersed.
The more established wealth of Europe seems best versed in the notion of global home-ownership. Not only is Europe itself full of billionaire boltholes but Europeans themselves venture to many luxury island resorts in the Caribbean and the Far East as well as into parts of the US and Canada.
One city that stands out as an extraordinary exception when it comes to overseas residencies is London. This city is a second home to UHNWIs from all regions of the globe. This buyer behaviour in residential real estate both reflects and has a knock-on effect on other types of real estate ownership too. London is a large part of the UK’s dominance in cross-border real estate investment of all types. Residential property is just a part of this global city phenomenon.
There are a significant number of hot spots around the globe where UHNWIs will invest.
These hot spots fall into three categories: cities, retreats and destinations.
Global cities are important for UHNWIs as
this is where wealth is made, stored and invested.
UHNWI home ownership in these cities closely reflects and underlies a predilection for other types of real estate investment in the same cities – and probably other types of inward investment as well. The selection of a city as a home often reflects other financial commitments there. Top cities, by the size of residential commitments are New York, followed by London, Hong Kong and Singapore.
Global retreats are many and varied, including islands, coastal resorts, lakes and countryside. The top location, by the value of UHNWI homes found there, is the Caribbean.
Many other retreats are part of the city scene, acting as weekend boltholes from places of work and business. The US has many examples of these, the Hamptons, Winnetka and Nantucket Island for instance.
Destinations of the wealthy have evolved for many reasons, mostly related to pursuits such as skiing, hunting, shooting, fishing, golf, wine and sailing. Places as varied as Aspen, Colorado and the Scottish Highlands fall into this category. Some are related to specific business types, for example, tech industries, tax havens, film-making or even politics. All are characterised by high-end housing in exclusive environments, such as Beverly Hills, Monaco and Bethesda, Maryland.
The emergence of retreats and leisure destinations is a nascent market in Asia. The development of resorts to rival Europe’s sun and ski playgrounds is only just beginning in the East; Japan’s ski resorts and China’s Hainan Island being rare examples.
YOLANDE BARNES, Savills World Research
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