Top Residential Locations of the World’s UHNW Population

According to the 2015 Global Luxury Residential Real Estate Report by Sotheby’s International Realty, the top cities for ultra high net worth residents are:

  1. New York, USA
  2. London, UK
  3. Hong Kong
  4. Los Angeles, USA
  5. San Francisco, USA
  6. Washington D.C., USA
  7. Singapore
  8. Dallas, USA
  9. Mumbai, India
  10. Paris, France

Ultra high net worth (UHNW) is defined by those with a net worth of US$30 million or more. There are approximately 211, 000 individuals worldwide who meet this requirement and each person averages 2.7 properties. The report also states that “United States is the most popular country for foreign UHNW individuals looking to buy secondary residences.” As you can see from the list, the United States holds the majority of UHNW residents worldwide. Also important, the world’s UHNW population grew 6% between 2013 and 2014, increasing the demand for luxury properties. Luxury real estate is deemed as any property valued at US$1,000,000 or more. Amazingly UHNW individuals tend to own at least 2 properties, and many have 3 or 4. These estates are purchased primarily for practical and business reasons, but emotional satisfaction plays a vital role as well.

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New York City Luxury Apartment

The report graciously breaks down the typical profile of luxury property owners by city. For example, the average UHNW New York resident is 60 years old, occupied in banking, investment, or finance, and has a median net worth of US$120 million. Sotheby’s CEO Kathryn Korte reported that a new record was set in Manhattan for the most expensive co-operative apartment ever sold at $70 million in 2014. It later broke the record again at $71.3 million. Interestingly, the report also claims that the emerging UHNW class from China and Russia are primarily younger, self-made individuals. China’s UHNW population has an average net worth of US$141 million and often elects to live in neighboring countries like Hong Kong and Singapore.

Definitely take a moment to read through the report for some interesting information regarding the world’s elite, where they chose to live, and how it affects the global real estate market.

Luxury Real Estate in Toronto

Toronto has been the fastest growing luxury real estate market in the world. According to a new report, conducted by Christie’s International Real Estate, Toronto was ranked the world’s hottest luxury real estate market.

The demand for mega-mansions and penthouses has grown substantially as wealthy buyers search for alternative investments such as collectible real estate. Toronto ranked 10th on the report’s luxury index overall but ranked first on the luxury thermometer. The city saw a 37 percent increase in luxury home sales in 2014, an incredible number especially when compared to the 4 percent mark a year before.

A large influence in the recent trends within the Toronto real estate market has been the low supply of homes available. This has pushed relatively average homes into the $1 – $2 million range and homes in more desirable neighbourhoods into the $2 – $4 million range. Furthermore, the housing shortage has pushed many luxury condo prices above the $1 million threshold.

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Toronto has a vibrant luxury real estate market (photo: Getty Images)

The houses and condos on the market are moving quickly, with prime properties finding a buyer within 31 days after listing on average. The fact that houses are moving quickly can have an influence on these soaring prices as home buyers do not have as much room to bargain because if they don’t act quickly, someone else will.

The luxury real estate market is booming as affluent investors continue to look to purchase unique and incredible real estate as a collectors items. Demand is growing among affluent Americans and Europeans as well as billionaires from unstable economies such as Russia and Middle Eastern countries who are looking for property investments to showcase in their portfolios. In addition, an influx of buyers from China has resulted following the country lifting a ban on investing overseas.

“People want trophy homes,” according to Eyal Ofer, a Monaco-based shipping and real estate magnate. “They’re a scarce commodity. And they’re better than gold because you can boast about it.”

The average starting price for a luxury home, in the areas Christie’s study took place, was $2 million. They defined luxury homes as having a combination of location, such as a prominent street address, and amenities such as privacy, urban conveniences or collectible architectural quality.

African Real Estate Investment Eyes Long Term

What’s causing the sudden interest in African real-estate and motivating international investors to seek out new prospects on the continent? According to Knight Frank, the world’s leading real estate consultancy headquartered in England, investors are currently attracted to the growth potential within African markets which makes good real estate highly desirable by investors abroad as well as investors within the African continent.

Knight Frank’s Africa Report 2015 points to projections on population growth across the continent by the year 2100 as a leading factor in investor interest. By 2100, it is projected that Africa’s population will quadruple to 4 billion meaning that 40% of the world’s population will reside within Africa. In Nigeria, which happens to be Africa’s largest economy with a GDP of $593 billion, the population is set to top nearly 1 billion by 2100.

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View of Victoria Island, Lagos, at night. Nigeria has Africa’s highest GDP

Impressive, right? And the growth has already begun across the continent. One of the fastest growing economic regions in the world is Sub-Saharan Africa and within the next five years 13 of 20 fast-growing global economies are projected to be within Africa. Luanda, the capital city of Angola currently has one of the highest office rents in the world at $150 per square feet. This is driven by lack of availability in the face of high demand for office space from the oil and gas sector. Adding to this, the population of Luanda is expected to grow by 70% by the year 2025.

Population growth is often accompanied by a growing middle class, and urban regions across the entire continent are seeing such growth. Retailers in particular are rushing to snatch up excellent real estate deals. Chinese investors are already active within real estate development across Africa and the experts at Knight Frank are also paying attention to more investment activities come out of South Africa, with more capital flowing in from South Africa into the northern regions than ever before.

This century will prove to be exciting for the entire African continent and it is clear that investors of all types are playing the long game when it comes to investing within Africa. However, it is doubtful that we will need to wait until 2100 to see some amazing developments coming out of these economies with growth well underway.

Vietnam Real Estate on the Rise

The Vietnamese real estate market is experiencing new life. Following almost a half decade of stagnation, as a result of the property bubble burst in 2009, the Vietnamese economy is rebounding and the real estate market is improving as a result.

New government policies, renewed interest by foreign investors, positive regional trends and the improving economy have all contributed to the recent real estate trends.

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Foreign investment is surging in Vietnam

As a result of revised policies, foreigners are now allowed to own property in Vietnam. The strong signs of recovery have already attracted foreign investors to fund over 1,600 projects. Investors see promise in the Vietnamese market because of the its high demand, young population and stable economy.

In early 2013, the Vietnamese government introduced a $1.4 billion stimulus package to offer low interest loans for the purchase of social housing in an effort to revive the real estate market. While only 14.5% of the package was distributed, the program was successful at stabilizing the market and increasing the number or real estate transactions.

The Vietnamese economy grew beyond expectations last year — gross domestic product growth reached 5.98% — and the economy shows no signs of slowing down. A $2.34 billion stimulus is expected for this year to support the commercial housing segment.

International property agencies forecast investment value in Vietnam to increase 5% this year to $118 billion. The investment growth is supported by a number of factors which have created a prime market environment. This include new private equity real estate funds, increase in institutional investors’ allocations for Asia Pacific, growing activity by Asian institutional investors and adequate debt financing.

However, there are some policies still in place which could potentially limit the market from reaching its full potential. The real estate investment trust (REIT), which is a popular method to raise funds around the world, is not currently available in Vietnam. However, the Vietnam State Securities Commission has stated that they are going to work on making amendments to allow for REIT funding in Vietnam. This announcement is a positive sign for Vietnam, as the real estate sector will need continued funding to take advantage of this remarkable market situation.

 

Real Estate Investment and Diversification

Adding real estate to your portfolio is a common way to diversify your investments and add stability. Those two results, which obviously go hand-in-hand, are why real estate investment is often suggested to those looking to mature and grow their portfolio. Let’s examine some ways that real estate investment can accomplish those goals.

Diversification

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Why is real estate investment healthy for your portfolio?

The most common reason for interest in real estate investment is diversification, which in turn will maintain the purchasing power of capital. There are well documented studies indicating that there is a low correlation between the real estate industry and stock and bond investments. Take this to mean, empirically, that real estate investment is an effective method of portfolio diversification. Also, consider how many different sectors of real estate investment there are. Coupled with consistent introduction of new products, and buyers end up with many different options. This flexibility allows investors to further mitigate risk.

Safeguard Against Inflation

Real estate has a great method of guarding against inflation. This stems from the owner’s ability to raise rental rates based on inflation and market value. Dissimilar to manufacturing or service based investments, real estate does not need to battle demand elasticity to increase prices. Granted, prices are subjected to competing properties in the same marketplace, but it stands to reason that those shifts would be effected by inflation equally. The hedging effect of real estate investment also maintains the purchasing power of capital because it passes a portion of the inflationary volatility to the tenants.

Portfolio Organization

Keep in mind that home ownership is, for most investors, the biggest single slice of their portfolio-pie. If you are considering moving a portion of your portfolio in real estate, you should incorporate your own home into the overarching strategy. It can be odd to consider your personal home as an important part of your portfolio, but keeping your eye on your long term goals will help give investors perspective.


 

These are just a few of reasons why real estate investment is an important part of one’s portfolio. As always, it is important to discuss your financial goals with a professional, such as Anthony S Casey.

Ranking the World’s Best Real Estate Markets

A study recently published by the Association of Foreign Investors in Real Estate has ranked the most attractive real estate markets in the world for foreign investment. The yearly survey conducted by AFIRE is a polling of principles and senior executives at global real estate investment firms. Members of AFIRE have an estimated $2 trillion in real estate assets.

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The United States is an attractive destination for international real estate investment (photo: Getty Images)

The results for 2014 indicate the broad appeal of properties in the United States. Three of the top six cities ranked were in the United States. New York City is once again number one, having been beaten by London in 2013. San Francisco and Houston are the other US cities on the list.

The United States was ranked the number one country with opportunity for capital appreciation, beating out Spain and the UK in the second and third position, respectively.

Granted, this organization focuses primarily on United States investment. In fact, inbound investment in the US is the common bond between all of it’s members, so take these results with a grain of salt. However, the results of this latest survey do indicate that the economy of the United States is continuing to rebound and offers stable investment opportunities. With the strength of the USD at an 11 year high, many foreign investors are taking notice.