Ultra-high-net-worth individuals hunting for profitable investment opportunities

Attitudes and preferences of high-budgeted investors towards property investments

According to a survey published by Knight Frank and Citi, commercial property remains the most preferred type of investment for the wealthy besides their own business. They make their choice after having assessed risk, potential yields and capital growth.

The survey provides a deep analysis of the attitudes and preferences of high-budgeted investors towards property investments. New York and London remain the two most important investment spots for HNWIs and this situation is expected to remain unchanged over the next ten years.

Many Asian cities – such as Beijing and Shangai (China) and Kuala Lumpur (Malaysia) – are moving up the global rankings – while established centres such as Singapore, Hong Kong and Tokyo are losing their top positions – and are challenging Western cities’ dominance on the world luxury property markets. Geneva and Zurich (Switzerland), Washington and San Francisco (USA) are sliding down the rankings; on the contrary, Mumbai (India) – where the price of luxury homes amounts to 17,100 euros per sqm – Moscow (Russia) and Sao Paulo (Brazil) are seeing their importance grow rapidly.

The performance of prime market has been determined by local currency trends. The euro and the pound weakened in 2010 and British second home buyers could not contribute to the recovery of the real estate market of Italy, Spain and Portugal, where English investors have always been present. The weakness of the pound, on the other hand, encouraged the recovery of London real estate market.

The performance of the luxury property market is driven also by education and second homes; indeed, 23% of newly-built homes in central London were sold to overseas investors in 2010.

The value of real estate properties has fallen in cities such as Dublin (Ireland) and Dubai (United Arab Emirates), but also in Edinburgh (Scotland) – where sales volumes have been limited by the restructuring of the financial sector and the difficult access to credit – Abu Dhabi (UAE), Chicago (Illinois, USA) and Los Angeles (California, USA). Prices in New York and London, instead, have risen by 10%. High-level dwellings here cost between 22,600 and 56,300 dollars per sqm. The value of real estate properties is soaring also in Helsinki (Finland), Paris (France), Marrakech (Morocco), Manila (Philippines) and Munich (Germany) that remains the most expensive city, as luxury properties cost 46 thousand euros per square metre. Among the leading cities there are also Milan (Italy) and Rio de Janeiro (Brazil).

Global investors are also attracted by agricultural land due to the increasing need for food production estimated by the OECD. The acquisition of farmland is a key issue for countries such as China, India and South Korea, where the population is growing rapidly. HNWIs look for investment opportunities in areas that offer vast strips of land for sale/lease. Fertile soils can be found in Russia and Ukraine, but these countries present a high level of political and operational risk. Freehold acquisition is very difficult in Russia and impossible in Ukraine where land ownership is subject to a moratorium.

South America has an interesting farming potential thanks to its favourable climate and productive soils, but values have started to increase considerably in many areas. Land values rose also in Canada – that offers farmland for sale at emerging-economy prices – and Australia that attracts investors because it combines stability and developing nations prices.