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Wanted: Ultra-rich property buyers
SINGAPORE, long seen as a real-estate haven for the ultra-rich, has joined the league of top five cities in wooing the rich into putting their money into brick and mortar.
The biggest magnet is Hong Kong, which has attracted US$798 billion in real estate holdings from ultra high net worth individuals (UHNWI). London is second with US$676 billion, followed by Moscow (US$263 billion), Singapore (US$217 billion) and New York (US$164 billion).
Together, these cities account for 40 per cent or US$2.2 trillion of all global real-estate investments by UHNWIs, said a joint report by Savills, global interior design house Candy & Candy and Deutsche Asset & Wealth Management.
Real estate has begun to look more attractive amid increased under-performance of the fixed-income markets and a prevailing caution towards equities, said the report.
Of course, there could be short-term fluctuations in real-estate prices in these mature locations, but the ultra-rich are undeterred from staying invested in them, said Yolande Barnes, the London-based director for world research at Savills.
Residential properties remain the preferred choice of the world's 200,000 UHNWIs, said Savills in a separate report; if these individuals own commercial properties, they do so indirectly through companies or other investment entities.
Savills puts the value of the world's real estate at around US$180 trillion, of which some 72 per cent 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 bought by private individuals, companies and organisations.
Carlos Arrizurieta, managing director at Deutsche Asset & Wealth Management's Florida office, said that his clients dedicate as much as three-quarters of their investment portfolio to direct real estate. In Hong Kong, real-estate holdings have been bolstered by the influx of mainland Chinese investors and the city's extremely high property values, said the joint report. Moscow, on the other hand, has a disproportionately high number of domestic ultra-rich individuals propping up its real-estate market.
The report does not, however, offer an exact breakdown of investments by domestic and overseas UHNWIs. Corporate and institutions show markedly different investing behaviour from ultra-rich individuals; the most active investment markets for them in the 12 months to February were New York and London; Hong Kong came in only at 10th place.
A Savills analysis has found that a small number of countries tend to dominate global real-estate markets. The world's top-tier global urban centres - the so-called "alpha cities" - have been key magnets, drawing investments from ultra-rich individuals. Nearly half of all UHNWI wealth is tied up in real estate in these 45 alpha cities, which account for just 5 per cent of the world's population.
Similarly, a few countries dominate as sources of wealth streaming into real estate: Germany, Japan and the US account for 39 per cent. The report projects, however, that the number of Asia's ultra-rich and their aggregate wealth will grow faster than in any other region in the next five years. China, India and Hong Kong are poised to climb up the list of top 10 real-estate investing nations.
A dozen cities across the globe which do not have world city status were named in the report as having the potential to rake in strong residential price increases. These rising stars range from the well-established such as Melbourne in Australia and Chicago in the US to the upcoming such as Chennai in India.
Those looking for income-producing properties are more likely to find high and rising rental incomes in places where real-estate values have not been driven by the ultra-rich, the report said. Ms Barnes noted that while urban cities have been the growth story of the last five years, prime hot spots are also showing up among getaway-retreat locations. She anticipates that residential retreats will go up in price by up to 10 per cent this year, with some returning to their former peaks by 2019.
The "golden visa" scheme offered in some countries such as Portugal, which grants foreigners residency permits if they invest in real estate beyond a certain value, has attracted significant Chinese investment, she added.