The Global Perspective On Prime Property & Investment
Liam Bailey, Knight Frank’s Global Head Of Research, Journeys Through The Wealth Report To Offer His Takeaways
In the middle of a global pandemic and the related economic crisis, why should we be interested in the wealthy? Simply put, if we are to understand market and asset performance then they form a central part of the story. The objective of The Wealth Report is to assess how the fortunes of UHNWIs(Ultra-High-Net-Worth Individual – someone with a net worth of over US$30 million including their primary residence.) are changing, where they spend time, what they invest in and what they are likely to do next. From policymakers to investors, a lack of insight into the behavior and attitudes of the “1%” risks a serious misreading of economic trends. This is the knowledge gap we fill.
Africa offers a wealth of investment opportunities, but has so far struggled to fulfil its
potential. One man aims to change that by harnessing the power of the continent’s
entrepreneurial spirit. South African venture capitalist and philanthropist
Vusi Thembekwayo talks candidly to The Wealth Report.
Discover why wealth populations kept growing despite last year’s economic turmoil and find out what the future holds for UHNWIs.
The global response to the pandemic supported the wealthy– With lower interest rates and more fiscal stimulus, asset prices have surged, driving the world’s UHNWI population (those with net assets of US$30 million or more) 2.4% higher over the past 12 months to more than 520,000. This trend was repeated across North America and Europe, but it was Asia, with 12% growth, that saw the real upswing. The expansion in wealth was not universal, with a fall in the number of UHNWIs in Latin America, Russia and the Middle East as currency shifts and the pandemic undermined local economies.
Asia is the key wealth story
The US is, and will remain, the world’s dominant wealth hub over our forecast period, but Asia will see the fastest growth in UHNWIs over the next five years, at 39% compared with a global average of 27%. By 2025, Asia will host 24% of all UHNWIs, up from 17% a decade earlier. The
region is already home to more billionaires than any other (36% of the global total). The Chinese Mainland is the key to this phenomenon, with 246% forecast growth in very wealthy residents in the decade to 2025.
Inequality will fuel risks to wealth accumulation
While Covid-19 is viewed as the biggest single risk to future wealth creation, nearly half of our Attitudes Survey respondents (wealth managers and private bankers) expect the growth in wealth inequality to fuel demand for policies aimed at curbing imbalance – specifically wealth taxes –with new or proposed plans in Argentina, Canada and South Korea likely to be replicated elsewhere.
The world will be less global…
Unsurprisingly, our survey confirms international travel will remain weak, with 84% of respondents expecting to continue to travel less this year. Where this trend could become more entrenched is the notable drop in demand for international education that our survey reveals. However, with 11% of Asian UHNWI house purchases expected to be driven by educational motives we may see a rise in permanent family relocations to education hubs, with London the main target.
…but the wealthy still want options
Despite a reduced desire to travel, nearly a quarter of UHNWIs are planning to apply for a second passport or citizenship – a remarkable 50% growth in a year. As we note there is a growing tension between rising transparency concerns over citizenship-by-investment schemes and a need to plug gaps in government finances through these schemes.
Find out why cities are set to prosper despite Covid-19, and why they will continue to attract UHNWIs, businesses and wealth creators.
Long live the city
As urban guru Professor Saskia Sassen explains, history shows us that cities rise and fall, but always rise again. The pandemic, far from undermining the city, has shown the potential for rebirth – expect to hear more about the 15-minute city, green cities, place-making and the coming redevelopment boom. No wonder, then, that development land is the third most popular property investment pick this year for UHNWIs. Our city leaders in 2021 for wealth,
investment, business heft and innovation: London and New York. For wellbeing: Helsinki and Madrid.
Uncover the latest insights and analysis on prime global residential property performance now and in the future.
House prices are rising because of the pandemic, not despite it
Our assessment of the world’s leading prime residential markets confirms that average price Growth accelerated over the past 12 months. While Auckland led the pack with an 18% uptick, reflecting New Zealand’s sure-footed handling of Covid-19, even those markets hard hit by the
pandemic are seeing growth. Low mortgage rates, a search for space, privacy and changing commuting patterns are helping push prices higher.
The pandemic-induced residential mini-boom will continue through 2021
The Attitudes Survey reveals that 26% of UHNWIs are planning to buy a new home in 2021, with the biggest driver the desire to upgrade main residences. Our survey points to a growth in demand for rural and coastal properties, with access to open space the most highly desired feature. The pandemic is super-charging demand for locations that offer a surfeit of wellness – think mountains, lakes and coastal hotspots. Demand will help fuel price rises of up to 7% for
our key markets this year.
Unwrap the multiple drivers and trends steering global investment and commercial property markets that will shape decisions now and post-Covid.
Expect more private investment in property
Despite overall property investment volumes falling in 2020, the capital deployed by private investors was still 9% above the 10-year average, far stronger than the 6% fall in the amount committed by institutional investors. This theme will continue through 2021 with a quarter
of UHNWIs planning to invest this year. In addition to development land, residential investments and logistics will lead requirements.
The pandemic is driving real estate innovation
The ubiquity of Amazon and Zoom has confirmed the ability of tech to concentrate wealth. However, the Attitudes Survey confirms that tech disruption is viewed as a key post-pandemic area for investment, driving demand in the still embryonic data centre market and the burgeoning life sciences sector. Spurred by the pandemic, life sciences, tech and advanced data analytics are creating new opportunities for rethinking office space in key markets. With 43% of
investors more interested in environmental, social and governance (ESG) focused investments than 12 months ago, expect rapid growth in the demand for green and energy efficient buildings.
Prepared to be dazzled by the most stunning images and objects to ever appear in an edition of The Wealth Report
Luxury investments confirm the ongoing search for returns
Finally, despite logistical challenges investors continued to drive values higher for key collectible assets over the past year – led by handbags (+17%), fine wine (+13%) and classic cars (+6%). However, a shift to private sales, as auctions were put on hold, saw the art market stutter and values decline. With disruption to these most global of markets likely to continue through the first half of 2021 it is the second half of the year when investors will likely see the longer-term direction for investment performance.
About The Author
Meet Roy, Roy’s Open Houses
I am proud to be both a Realtor and a loan officer. After 28 years in mortgage banking, I know a little bit about financing the home of your dreams. I help families restructure their financial world so they can enjoy a better quality of life rather than working for the man and being a slave to their debts. I love to make these processes fun, educational and hassle-free!
As a Realtor for the last 10 years, I have helped families fulfill their dreams of owning a home with the white picket fence, kids, and dogs running around in the yard. Since coming to this country from Colombia in the early ’80s (yup..I remember the Brady Bunch, corduroy and 8 tracks), the American Dream of home ownership was a driving force for my single mom of 4 kids. She bought our first home in New York. She always had a dream of creating a safe, life-filled home for us. Her desire to make our home fun, warm and inviting was contagious to both our immediate family and friends that we shared fun times, playing in the backyard swing and trees (yes, the suburbs of Queens had trees!).
This dream was carried on by a young man heading west as a young Marine. I headed to SoCal and landed in the beautiful beach community of San Clemente in 1982. After serving 6 years, my grandmother asked me to come back to New York. My response to her was that I could be a bum in SoCal and live better than going back to New York. I then bought my first home and brought them over here. Oh yes, I am still a surf bum. 🙂
I have owned several homes since then and have raised 4 beautiful children. From Huntington Beach Tower 20 to Old Mans in San O., and on some great CA days we have even made it up to Big Bear for some afternoon snowboarding sessions. Needless to say, I have been blessed to enjoy my own version of “California Dreamin”. I enjoy nothing better than helping young couples start theirs, along with those folks who are going through their life journey in whatever phase of life they find themselves in, whether that’s up-sizing, empty nester, downsizing, or even finding that one-story home with a view for those sunset years.
Come experience life at its fullest even in the mundane world of finance and real estate!
And remember… Keep love always at the front of what you do.