World’s Wealthy Continue to Splash Their Cash on Property

Ultra-high-net-worth individuals (UHNWIs), defined as those having $30 million or more in assets, have funnelled about a quarter of their investable wealth into real estate, with those from Russia and African nations viewing it as an important safe haven for their money. This finding comes from Knight Frank’s 10th Annual Wealth Report, a survey of the world’s leading private bankers and wealth advisors. According to the respondents, 54% of UHNWIs increased their allocations in residential property, including second homes, over the past decade. Just over 40% told the global real estate consultancy they expected to increase that allocation further over the next 10 years; 30% of the respondents’ clients are likely to consider a residential purchase in 2016. When asked which factors are driving this interest in residential property, 55% said it was as an investment to sell in the future while 46% cited investment diversification. Residential real estate as a safe haven for funds also scored highly, particularly among UHNWIs in Russia and other members of the Commonwealth of Independent States, an association of countries once part of the Soviet Union. According to Deon de Klerk, head of wealth and investment for Africa and International at Standard Bank, investing in real estate is also becoming more important to wealthy Africans. “The majority of our high-net-worth clients across Africa seek international diversification, with an ever increasing appetite for real estate,” he said. While the number of UHNWIs declined by 3% last year to around 187,500 worldwide, this still marks a 61% increase from 116,800 in 2005. Last year’s decline reflects slower economic growth and the more volatile financial climate, including a continued drop in oil prices. Currency movements also exacerbated declines in local currency wealth for many UHNWIs when their net worth is expressed in dollar terms. Gráinne Gilmore, head of U.K. residential research at Knight Frank, said, “Despite longer term growth, data from 2015 shows the first annual dip in the global ultra-wealthy population since the financial crisis.” Last year, she noted, just 34 of the 91 surveyed countries saw a rise in their number of ultra-high-net-worth individuals.