Real estate still a prime portfolio play!
In the face of concerns about the state of the global economy and global political instability, many of the super rich have shifted investment priorities. Instead of trying to grow their wealth, they are focused on wealth preservation – maintaining the wealth they have in today’s challenging and unpredictable investment market. A Reuter’s article calls the resulting investment strategy a “catastrophe portfolio” which "allocates one third of the money to gold, one third to defensive and internationally diversified blue chip company shares, and a third to the debt of ultra-safe developed countries.” (Anyone have a clue as to what countries those might be?)
The affluent in Europe, the Middle East and China are also sending more of their money abroad, some of which ends up in high-end residential real estate. Hence the property booms in London and Vancouver (B.C.). Paris may be next in the growing list of very desirable places to buy luxury homes and condos. While the “catastrophe portfolio” may be embraced by the most nervous of the wealthy, a 2011 study by Knight Frank and Citi Private Bank reports that the ultra high net worth individuals (UHNWI) still hold property close to their hearts. According to their survey, it makes up 35% of the average UHNWI’s investment portfolio (this includes both residential and commercial). Those surveyed in this report had, on average a net worth of $100 million. The report goes on to say, “The factors that encourage the wealthy to seek out and buy the very best property in cities such as London have, if anything, become even more important.”
We note that this flight to quality real estate is also being seen in major U.S. and Canadian markets from New York and Washington D.C to Toronto and Los Angeles. Factor in the importance of education to Asians -- especially the Chinese -- and you find one more reason for affluent Asians to purchase in the U.S. and Canada. Many wealthy Asians are sending their children to U.S. and Canadian colleges and universities. This often leads to a real estate purchase – either a condo for the expat student and/or a luxury residence for the family to use when visiting the scholar. This education-related demand is the most important driver of Chinese purchases in the U.S. other than investment. This also means that Chinese buyers are popping up in many markets with colleges and universities.
All this bodes well for foreign residential investment in the U.S. Keep your eyes and ears open for opportunities in your markets.
