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Global Wealthy Want More Real Estate

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Wealthy investors around the world crave real estate.

A new Savills/Wealth Briefing survey of private bankers and wealth managers found that 91% of global high-net-worth investors were looking to increase or maintain the real estate holdings they own directly, and 87% intended to increase or maintain indirect holdings.

“Land and real estate has historically been a key measure of wealth, and is often the first asset that people acquire with surplus capital, a trend that has become increasingly prevalent among the wealth generators from the new world economies,” Yolande Barnes, Savills’ director of world research, said in a statement.

The survey found this true across global regions and a wide spectrum of real estate types.

Seventy-two percent of wealth managers said their clients would buy residential properties over the next five years, 60% listed development land and 50% said they would buy offices. Less appealing were retail investments, noted by 44% of respondents.

North America was the choice investment destination of investors, according to 67% of wealth management respondents, followed by 63% for the U.K. and 58% for both Pacific Asia and the South Asian Subcontinent.

In contrast, only 43% of wealth managers said Latin America was attractive to their clients, 38% pointed to Eastern Europe and former Soviet bloc countries as desirable destinations for investment, and 37% listed China and Hong Kong.

The survey found that more than one-third of wealthy clients held between 1% and 10% of their wealth in indirect investments.

For some 14% of investors, direct investment comprised upward of 40% of their portfolios, excluding permanent residence, while 36% hold less than a tenth of their wealth in such assets. 

“Private individuals have lost faith in financial instruments after the crash,” Barnes said in explaining wealthy investors’ penchant for real estate. 

“They’re looking for alternatives to pieces of paper that leave them exposed to the vagaries of the financial system.” 

Barnes said evidence suggested that this trend was not just cyclical, and would continue to push prices in world-class real estate markets.

“That demand for property is not only being driven by low interest rates; structural shifts mean that real estate is likely to grow in importance for HNW investors,” the report’s author Harriet Davies said in the statement. “It is crucial that advisors understand the evolving role of real estate in portfolios.”

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