According to a study by Wealth-X and the Sotheby's International Realty, a growing number of ultra-high net worth (UHNW) individuals view homes as 'opportunity gateways', driving buying decisions that are based on potential opportunities from owning these luxury residential properties.
The UHNW Luxury Real Estate Report: Homes As Opportunity Gateways reveals two trends that are fueling the rise in the number of ultra wealthy individuals who are buying luxury homes:
1) International home-buying by UHNW individuals (defined as those with at least US$30 million in assets) from emerging nations seeking a safe investment diversification.
2) Home-buying as part of a program to gain citizenship or residency status in foreign nations.
The report provides insight into the UHNW residential real estate opportunities in Sydney and Vancouver for buyers seeking safe investment diversification; and Malta, the Bahamas and Sao Paulo, which may appeal to ultra wealthy buyers who are seeking citizenship or residency through property investment.
Key report findings include:
12% of second homes purchased by UHNW individuals in emerging countries (those who reside in BRICS nations) are located outside their country of residence.
Recent market fluctuations in emerging nations are leading a new generation of UHNW investors to consider investing in luxury residential real estate in Western markets.
Chinese UHNW individuals make up the third largest share of foreign UHNW homeowners in the United States, behind only Canada and the United Kingdom.
Twenty nations in Europe and the Americas now offer citizenship or residency programs to individuals willing to invest in domestic residential real estate.
Many residential real estate markets with such programs - including Sao Paulo, Malta, and the Bahamas - offer good long-term investment opportunities.
The UHNW Residential Real Estate index, tracked by Wealth-X, rose to 115.2 in Q2 2015, an 8.3% rise year-on-year, and the sixth consecutive quarter in which the index has risen. The continued rise in the index reflects the confidence of UHNW individuals to invest in luxury residential real estate.
The index takes into account the full range of luxury residential properties that are owned by the world's wealthiest individuals. Wealth-X data shows there are 211,275 UHNW individuals globally, who collectively hold nearly $3 trillion in real estate assets, equal to 10% of their net worth.
Wealth-X President David Friedman commented, "Wealth-X is pleased to partner with the Sotheby's International Realty brand for this third luxury real estate report for 2015. This new joint study explores the trends and home-buying motivations of a distinct group of ultra wealthy individuals in the emerging markets. As their wealth grows, so will their investment fueled by various motivations, be it to diversify their portfolio or to gain citizenship or residency in a foreign country."
According to Philip White, president and chief executive officer, Sotheby's International Realty Affiliates LLC, this joint report was designed to provide an understanding of the trends driving buying decisions of ultra-high net worth individuals around the world. "The research reveals trends that go beyond traditional motivations and help guide real estate investments that contribute to long-term wealth," he said. "It underscores the important role real estate plays in a larger strategy to build a valuable asset portfolio."