More than 80% of the world’s richest people own two or more residences that they bought for personal use rather than as investments, and the total value of these properties jumped 8% in 2014 to more than US$3 trillion.
These are the findings of a new survey by Sotheby’s International Realty and Wealth-X, which details current real estate tends among the 211 275 individuals in the world who have $US30 million or more in assets and are thus defined as Ultra-High Net Worth Individuals or UHNWIs.
This survey also found that in 2014, the wealth of more than 7% of UHNWIs actually came from real estate, compared to 5% in 2013. Super-rich women value real estate assets more than their male counterparts, holding 16% of their net worth in such assets, on average, compared to less than 10% for men.
UHNWIs with a net worth of US$30 million to US$50 million usually keep their primary residences for over 15 years and their secondary residences for over 10 years. Billionaires change one of their four properties, on average, once every three years.
The survey also found that secondary residences are typically 45% more valuable than primary residences; twice as big and set on grounds of around four hectares.
The current favourite real estate destinations for UHNWIs are Monaco, with 83% of its homes in foreign hands, London, New York City and Hong Kong, but certain ‘rural’ areas around the world are gaining in popularity, with more than 30% of UHNWIs owning a country retreat.
Currently, most super-rich buyers of secondary residences are from Russia, China, the Middle East and Brazil, but more than 6% of UHNWIs have relocated their primary residence to a different country from which they were born, and now keep their properties in their home countries as secondary residences. India is the leading country in this respect.
Meanwhile, the survey report also forecasts that the ongoing shift in the wealth creation cycle from the West to the East will bring new cities, and especially new luxury developments within those cities, to the fore as favoured real estate investment locations.
Lew Geffen, chairman of Sotheby’s International Realty in South Africa, says another driver of this shift will be the fact that no one wants to deal with the traffic problems arising from increasing urbanisation everywhere, and that the super-rich have the option to avoid these problems by buying über-luxury apartments right at the heart of the cities where they do business, as they are already doing in Sandton, for example.
At the same time, the survey found that a growing trend of inter-generational wealth transfers will assume growing significance in the luxury real estate market over the next few years, because luxury residential real estate is an asset class favoured by UHNWIs who inherit wealth.
Such individuals currently hold 17% of their net worth in such assets, while self-made UHNWIs only have about 9% of their wealth in property.