The wealthy still have an appetite for luxurious property, report shows

Property still tops the investment table of the ultra-high-net-worth individuals, with the interest cutting across both the old and new generation.

The latest wealth report by Knight Frank shows that two in every three ultra-high net worth individuals would allocate substantial amount their money to property.

The report is from an attitude survey carried out by the property consultancy and management firm.

“Just under a third of the total wealth is held in principal and second homes, while the remainder is invested indirectly (through real estate investment trusts – Reits) into investment property,” reads the report released early this month.

According to the report, a growing share of private capital is being poured into property. “While private investors increased their exposure to real estate investments by 52 per cent in 2021, institutional investment volumes rose just 29 per cent,” reads the report. 

Private capital now, it adds, accounts for 35 per cent of all investment transactions. 

With 23 per cent of ultra-high net worth individuals planning to invest in property this year, it is expected that offices would be the biggest target, with logistics pipping residential to second place for the first time,” the report predicts. 

The report notes that most investors want environmental, social and governance compliance assets - the main reason being to future-proof their portfolios.

The premium value of up to 18 per cent for the ‘greenest’ offices is also a factor. “The biggest barrier for future investment is ‘lack of opportunities’ – a clear call to action for developers,” the report reads.

These super-wealthy individuals appetite for luxurious property is also poised to increase.

The report shows that the average value of luxury residential property increased by 84 per cent in 2021, noting that this is the highest annual increase since the launch of the previous Prime International Residential Index (PIRI 100) in 2008.

Of the markets tracked, only seven saw price decline in 2021. Dubai saw a growth of 44 per cent.

According to the 2021 edition of The Wealth Report Attitudes Survey, it was uncovered that 70 per cent of ultra high-net-worth individuals under the age of 40 had a different view of their parents when it came to property investing.

“This generation is more global, more tech savvy and places greater emphasis on wellbeing – their own, that of their families and that of the environment,” reads the report.

The respondents of the attitudes survey drawn from North America, Asia, Europe, Australia, Latin America, Middle East, Russia and Commonwealth of Independent States (CIS) and Africa noted that the next generation view real estate – be it home or investment, as more akin to an investment portfolio – the economic case has to stack up.

The report says Singapore’s tech-savvy young ultra-high net worth individuals are looking beyond the traditionally sought-after good class bungalows (the pinnacle of the city’s property ladder), often seen as exclusive and a long-term store of wealth.

“They want flexibility to build their own home to suit their lifestyle. They often include smart technology, a focus on energy efficiency and connectivity, both digital and physical,” says Nicholas Keong of Knight Frank Singapore Private office.

Younger ultra-high-net-worth individuals are global buyers who want to hold assets across geographies, says Rory Penn, Head of Knight Frank’s Private Office.

“They put emphasis on service provision, open space, amenities and room for entertaining,” the report said. As this cohort of wealth continues to grow, property markets will adjust, the report says.

Higher taxation is among the challenges foreseen in the report that may affect the property market.

This is attributed to increase in inequality which will prompt governments to impose higher taxes on those with higher assets.

It notes that political risk is also going to be more significant in the years ahead.

China is a particular concern with its attempt to shift the growth model away from excessive real estate development towards more consumption and next generation industries, it adds.