Around the World in Dollars & Cents

Around the World in Dollars and Cents
 
Where Is The Smart Money Going?

28 January 2016, by Paul Tostevin

Using the Savills Wealth Briefing survey, we find out which cities are set to see the most investment from HNWI in the coming years.

 

Real estate intentions of HNWI in cities, next five years

The locations shown on the map are those where buy and hold intentions given by survey respondents outweigh those with intentions to sell.

 

 

Sources: BLS/Federal Reserve

In our last issue of Around the World in Dollars and Cents we started to look at the impact of private wealth on global real estate. Recovering participation by institutional investors means that investment share by private wealth has since reduced slightly but still accounts for between 16% and 20% of all big ticket global transactions. The investing intentions of this sector are thus still an important indicator, especially as leverage tends to be low and the appetite for alternative assets high (see fig. 1).

FIGURE 1

UHNWI and HNWI intentions: top sectors for investment (next five years)

 
Figure 1

Source: Savills World Research/Wealth Briefing

The role of private wealth has been instrumental for example in the development of the student housing sector outside the US. Many privately funded blocks built in the UK are now being traded to US institutions. It is therefore worth understanding not just in which sectors ultra high net worth individuals (UHNWIs) and high net worth individuals (HNWIs) are interested, but also which geographies. This article looks in detail at future investing intentions of this group from a survey of advisors undertaken by Savills World Research with Wealth Briefing in 2015.

We asked wealth advisors to identify the sectors, regions and cities in which their clients intend to buy, hold and sell real estate in the next five years. The aggregated results are shown on the map above.

REAL ESTATE INVESTMENT INTENTIONS: CITIES

Gateway global cities remain buys, despite very strong recent performance and plateauing prices in some of them. Important global centres of business such as London and Dubai lead the pack, and reflect the trend for UHNWI and HNWI to invest in the cities in which they are active in business, visit often or, simply, know.

The results of our survey also reveal a broadening of purchasing intentions to other centres. Madrid, Manchester, Barcelona and Chicago are all emerging as net buys. This reflects a global trend in a crowded investors’ market towards higher yielding secondary property, second-tier cities and alternative assets. European cities exhibiting this trend include Amsterdam, Oslo, Brussels and Berlin.

In Asia, Tokyo looks set to see more UHNWI and HNWI investment as market recovery gathers pace. Singapore is a buy, along with neighbouring Johor Bahru, a nod toward the strategic benefits of the neighbouring Malaysian city. Cities in emerging economies also feature on shopping lists for the next five years. Manila is a pick in the Philippines, Vientiane as Laos’ economic centre, and Phnom Penh, Cambodia’s fast-growing capital.

In Latin America, Mexico City is a hold among UHNWI and HNWI, while smaller Querétaro, a safe, business-friendly city with a historic centre (designated a UNESCO world heritage site), is a buy. In Argentina, Mendoza, the largest wine-producing centre in Latin America and gateway to the Andes, stands out as a city of choice in the region.

In the US, UHNWI and HNWI investors are set to concentrate in certain pockets: the Pacific Northwest, California, Texas, parts of the southwest and north-east, along with Toronto in Canada. Cities in these regions are driven by the knowledge economy, fast-growing local populations and, in many cases, a burgeoning tech industry. Net holds (but not new buys) include Beijing, Shanghai and Hong Kong and reflect the fact that these are already fully invested cities, as well as uncertainty around China’s growth prospects. In the US, prospects for Los Angeles, New York, Washington DC and Miami remain positive but as economic recovery spreads across the country there are numerous other buying opportunities, especially in small tech-friendly regenerated cities.

African centres, including Nairobi and Cape Town, are net holds. While there has been plenty of foreign investment into income-producing assets on the continent (such as land and mining), African cities have yet to experience the same levels of inward investment seen into other regions. Africa is likely to see more acquisition activity – especially beyond the five-year horizon of our survey.

Overall, the world still offers a big field for global real estate investors to play in. Private investors and quasi-private equity like sovereign wealth funds will often point the way to where corporate money and institutions follow.

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Key Contacts

Yolande Barnes

Yolande Barnes

Director
World Research

Savills Margaret Street

+44 (0) 20 7409 8899

 

Paul Tostevin

Paul Tostevin

Associate Director
World Research

Savills Margaret Street

+44 (0) 20 7016 3883

 

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