The Growth of the Luxury Property Market

Credit Wealth-X

A 2017 report by the Wealth X group detailing the property preferences of high-net worth individuals has outlined the increasing appetite for property by the wealthy. 10 percent of high-net worth individuals own five or more properties, says the report. In a deviation from the traditional norm of the wealthy having their properties within their national territories, high-net worth individuals now have their real estate interests spread across globe. This distribution of investments has been attributed to three developments.

First, the growth and improvements in modern civil aviation which have made mobility across different continents easy and even desirable. As a result, wealthy individuals can buy or build and spend time at different residences in around the world without limitations in managing their businesses. These prospects will be solidified by the fact that aviation technology can only get better, further reducing the travel time between distant locations.

Secondly, the technology revolution that has transformed and revolutionised communication at both personal and corporate levels. The internet, email and smart telephony have created a new level of business. An executive can now hold a meeting from his remote residence in a distant corner of the world, with his staff based in different parts of the world. Furthermore, the cost of communication has become negligible, giving considerable latitude to the remote control of business.

Thirdly, globalization has opened people and businesses to new opportunities and frontiers for expansion of business. Markets are no longer restricted by borders, and regional and international trade is more attractive than ever. In effect, it has become strategically advantageous for the ultra-high net worth individuals to own homes in one or more of the major commercial hubs of the world. Cities such as New York, London, Hong Kong and Singapore are some of the popular financial centres that have attracted very wealthy tenants.

The combination of these three factors has unlocked the potential for ultra-high net worth individuals to roam large in the international real estate market as well as to amass fortunes in the dynamic global economy. As a result, the population of ultra-high net worth individuals has grown in the last two decades from about 80,000 to 212,615 in 2015, a large percentage of whom are self-made. This number is expected to exceed 318,000 by 2020 with a cumulative net worth of US$46.2 trillion.

The accelerated rate of wealth generation partly explains the increased local and international demand by consumers and businesses that has spurred the development of emerging markets. Real estate and luxury assets contributed to 8.9% or US$2.7 trillion dollars of the assert holdings for ultra-high net worth individuals as of 2015, although this constitutes the smallest portion of their asset holdings.

Globally, the demand for the luxury residential property grew in the aftermath of the global financial crisis, peaking in 2015 before slowing down in the first half of 2016. This was attributed to an increase in supply unmatched by a lower than expected demand which drove prices and sales volumes down. Even amidst this market glooms, there were properties that continued to grow in value. These were properties with an underlying sense of optimum practical, emotional and financial benefits.

Source;Wealth-X

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