Today’s high net worth investors are hungry for real estate properties, and they have a clear preference for properties in North America, reveals a survey produced by real estate services firm Savills and strategic advisory firm Weatherill Consulting. The firms interviewed wealth managers and private bankers around the world for the survey called “The Weight of Money: How Private Investment is Changing the World of Real Estate.”
The survey found that 53 percent of wealth managers and private bankers expect their clients to increase allocations to direct investment in real estate over the next five years, while 38 percent expect those allocations to stay at current levels. Only 9 percent of wealth managers expect their clients to cut back on direct real estate investment.
North American real estate remains more popular with high net worth individuals than real estate in any other part of the world, with 67 percent of wealth managers expecting their clients to increase allocations here over the next five years. Fifty three percent expect their clients to hold on to assets already in their investment portfolios, and 23 percent expect clients to attempt to sell their properties within a five-year timeframe.
Residential real estate is still the most popular asset class among this investor group, with 72 percent of wealth managers expecting their clients to buy residential assets in the next five years, and 56 percent expecting clients to hold on to purchased properties. Twenty two percent forecast their clients will try to sell their residential holdings during the five-year timeframe.
Development land is the second most popular type of investment asset, with 60 percent of wealth managers expecting clients to buy more development parcels, and 36 percent expecting them to hold on to the parcels they’ve got. With the exception of types of real estate labeled as “other,” retail seems to be the least popular with high net worth investors right now, with only 44 percent of managers saying their clients are looking to buy retail properties in the next five years, 43 percent saying clients are planning to hold and 28 percent forecasting their clients will sell off retail assets.
The survey authors point out that high net worth investors are not beholden to any specific timeframes when it comes to real estate allocations and return expectations the way institutional investors are, so their behavior is not driven by short-term market movements.
The majority of the wealth managers surveyed are based in the United Kingdom and North America, at 35 percent and 18 percent respectively, followed by Western Europe and Scandinavian countries (15 percent). Wealth managers in Asia Pacific made up 9 percent of the survey sample; another 8 percent were based in China and Hong Kong. The rest were based in South Asia, the Middle East and North Africa and Latin America.
When it comes to the clients these manager advise, however, the majority (38 percent) are based in Asia Pacific, followed by North America (37 percent), United Kingdom (31 percent), Africa (23 percent) and Latin America (21 percent). The remaining clients are based in China and Hong Kong, Western Europe, Middle East and North Africa, South Asia and Eastern and Central Europe (all under 20 percent).