Luxury Trends

China: Reversal of Fortunes?

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Over the past few years, Chinese buyers have been one of the big stories in luxury real estate.

Recently, there has been increasing speculation about troubles in the Chinese economy.  

There is also growing speculation that A Chinese housing market crash could be even more disastrous than America's (Quartz), and concern that As credit tightens at home, Chinese sell Hong Kong luxury real estate (Reuters).  

Will wealthy Chinese sell-off overseas properties to gain liquidity?  
Are we seeing the beginning of a bubble-burst?
Stay tuned...


Millennials - Breaking the Myths

MythMarket research firm Nielsen has released a new report: Millennials - Breaking the Myths.  

Among their key findings, Millennials are...

  • Diverse, Expressive and Optimistic

  • Driving a Social Movement Back to the Cities

  • Struggling, But They Have an Entrepreneurial Spirit

  • Deal Shoppers and Desire Authenticity

  • Connected and Want the Personal Touch

Contrary to popular notions, some millennials are quite affluent.  About 15% of Americans with assets above $2M are Millennials:

Wealth

Where do the wealthier Millennilas live?

Map

For more details, download the full report.


The Ultra-Rich Plan to Buy More Property in 2014

UHNWIs plan to increase their allocation to propertyAccording to the Knight Frank The Wealth Report 2014 which surveyed about  600 private bankers or wealth advisors representing around 23,000 UHNWI clients across the world,

"Almost a quarter of UHNWI investment portfolios is accounted for by property and as an asset class it is growing in popularity.

Just over 40% of survey respondents said their clients increased their allocation to property in 2013 and 47% expect it to increase further in 2014.

Residential property was the most popular area to invest in (54%), followed by commercial premises (34%) and agricultural land and forestry (12%)."

More info on the Knight Frank blog

The Wealth Report 2014


Über Rich...and Getting Richer

Cosimo_ii_de'_medici_adn_two_[1]"For Rich, ’13 Was Good for Making, and Spending, Money" - an  article in Yesterday's New York Times, highlights the fact that the wealth of the über-rich continues to grow.  

A few of the highlights:

  • The world’s club of ultrawealthy individuals, or those with $30 million or more in net assets, added about 5,000 new members last year

  • Over the last decade, the ranks of the über-rich have swelled by 59 percent, and the register of billionaires climbed 80 percent, to 1,682

  • The world’s 0.1 percenters had a pretty good year; three-quarters said their assets had increased. Only 4 percent said they wound up worth less

  • By 2023, China is expected to have 322 billionaires, more than Britain, Russia, France and Switzerland combined

  • Looking for someplace to park their wealth, the world’s rich still prefer property


Chinese Real Estate Investors Predicted to Flood US

CoinsHighligts from the OPP article "China and US 'to top cross-border property investment'":

  • Chinese investment in overseas property is set to at least double in 2014
  • By 2016, Chinese cross-border real estate funds flowing in to the United States will be the highest in the world, beating the current US$1.3billion from Singapore to the UK
  • Among leading targets for High Net Worth Investors, commercial investors and developers are the gateway cities of New York, Los Angeles and San Francisco

For more details, check out the full artcle.


Downton Abbey? Not Quite.

New-York-TimesWhile the words "butler" and "household staff" might evoke visions of the post-Edwardian world of Downton Abbey, the reality of today's household staffs is really quite different.  

Increasingly, "The New Domestics " are corporate warrior types and graduate degreed specialists, quietly relocated to the private residences of the world's billionaires and UHNWIs.  

"On the West Coast, the 50-something chief of staff for a young billionaire has a master’s in divinity from an Ivy League university and more than a decade of experience working for an East Coast billionaire... He describes his job, which pays in the mid-six figures, as “managing the managers,” the scope of which includes the oversight of the private staff in the family office, along with estate managers, housekeepers and nannies — more than 40 in all, all of whom enjoy a lush benefits package, including a 401(k) plan that is competitive with any you would find in the corporate world."
- from The New York Times, "The New Domestics."

Check out the full article in last week's New York Times for a peek into this often hidden world.

 As a professional whose clients are the affluent, think about how they prefer to structure their lives, manage their time and resources, and what level of skill and expertise they expect from their staff and their vendors.

Do you and your staff measure up?


World’s Ultra Wealthy Hold a Fifth of Their Wealth In Real Estate Assets

If you are interested in the Ultra-High-Net-Worth Individuals and haven't yet seen the latest WealthX/UBS "Billionaire's Census 2013," this press release and video is a must see:

 

London/Singapore, 15 January, 2014 – Private wealth is increasingly shaping the world’s real estate markets and the use of private equity in major property deals worth at least US$10 million has nearly trebled since 2009.

Real estate now accounts for around a fifth of the invested wealth of the nearly 200,000 ultra high net worth individuals (UHNWIs) in the world, according to new analysis from international real estate advisor, Savills, in association with Wealth-X, the world’s leading UHNW intelligence provider.

In Around The World In Dollars And Cents published today, Savills estimates that the total value of the world’s real estate is now around US$180 trillion, some 72 per cent of which is owner occupied residential property. Of the US$70 trillion that is ‘investable’ and therefore traded regularly – including US$20 trillion of commercial property – over half is being bought by private individuals, companies and organisations. Investing institutions, listed companies and publicly owned entities are becoming relatively less important to world real estate as a result.

Around 3 per cent, or US$5.3 trillion, of the world’s total real estate value is owned by UHNWIs. This wealthiest 0.003 per cent of the world’s population has real estate holdings which are worth an average of US$26.5 million each.

“Global real estate is mostly residential and held by occupiers, but private owners are becoming more important in the world of traded investable property,” says Yolande Barnes, head of Savills world research. “Since the ‘North Atlantic debt crisis’ of 2008, sovereign wealth funds, wealth management companies, private banks and family offices have stepped into the property deals that corporate bankers have deserted.

She added that: “In the world’s leading cities, the willingness of private wealth to take the place of debt finance or to take a higher-risk development position is now making the difference between deals done or schemes mothballed.” Savills estimates that around 35 per cent (or 6,200) of global big ticket (>US$10m) deals in 2012 were only possible because of private funding.

Mykolas D. Rambus, CEO of Wealth-X, confirms the growing importance of private wealth: “We forecast that the UHNW population will grow by 22 per cent by 2018, its combined wealth – currently US$27.8 trillion – is expected to total over US$36 trillion by 2018. This presents huge opportunities for those involved in global real estate investment to create the right product in the right locations.”

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The firm has also analysed the way private money moves around the real estate world and found that the majority (92%) of investments are within the ‘home’ global region. North America stands out as uniquely domestic, with 99 per cent of all UHNWI investment coming from US citizens themselves.

Meanwhile, mature and emerging nations have seen much more cross-border inward investment. Just under half (44%) of UHNWI investors in Africa and two-thirds (66%) in Latin America are from outside the home region.

European real estate markets are the largest and most international, having attracted the most global inward investment, relative to size, with London the standout global destination for private inward real estate investment from virtually every corner of the globe.

“In recent years there has been a tendency for UHNWIs to focus on ‘safe haven’, trophy properties for capital growth and wealth preservation”, says Barnes. “In future, we anticipate that some will begin to seek more productive, long-term income-producing positions.

“UHNWIs will be competing more directly with institutional investors in future but, being more opportunistic and less constrained by formal criteria, are more likely to become pathfinders and pioneers than corporate investors are.”

For further information, please contact:
Yolande Barnes, Savills World Research +44 (0)20 7409 8899 / +44 (0)7967 555501
Sue Laming, Savills press office: +44 (0)20 7016 3802 / +44 (0)7946 635866
Fauzi Ahmad, Wealth-X +65-86536514

About Savills
Savills is a leading global real estate service provider listed on the London Stock Exchange. The company, established in 1855, has a rich heritage with unrivalled growth. It is a company that leads rather than follows and now has over 500 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East.

About Wealth-X
Wealth-X is the definitive source of intelligence on the ultra wealthy with the world’s largest collection of curated research on ultra high net worth (UHNW) individuals, defined as those with net assets of US$30 million and above. Headquartered in Singapore, it has 12 offices on five continents. (www.wealthx.com)

Press Release Source: 
http://www.wealthx.com/articles/2014/world%E2%80%99s-ultra-wealthy-hold-a-fifth-of-their-wealth-in-real-estate-assets/


The Luxury Segment Continues to Outperform

"The post-recession reality is that the customer base for businesses that appeal to the middle class is shrinking as the top tier pulls even further away.  

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So says The New York Times in yesterday's Business Day article: "The Middle Class Is Steadily Eroding. Just Ask the Business World."

In a nutshell: Income inequality is deepening. Affluent consumers are spending more and driving the economic engine. From restaurants to retail, appliances to casinos, the "high-end" is where the action is and it is largely driving what growth there is in the economy.

"The current recovery has been driven almost entirely by the upper crust...about 90 percent of the overall increase in inflation-adjusted consumption between 2009 and 2012 was generated by the top 20 percent of households in terms of income."

Throughout the downturn, the luxury segment was the "good news" story in real estate and in most markets, it continues to be the dominant segment driving the post-recession recovery.

While growing income inequality is most surely an unwelcome reality for this country, savvy agents are positioning themselves to capitalize on these trends and effectively serve the most active and profitable segments of the market, which in many places, continues to be luxury.


Chinese Tsunami to Continue in 2014

Prediction for 2014:  Watch for the wave of affluent Chinese to become an even bigger force in the U.S. luxury market.  Already the second largest foreign buyer group in the U.S. (after Canadians), wealthy Chinese are drawn to the U.S. (and Canada) for several reasons:

  • Growing numbers of affluent Chinese choose to send their children to North America for their university degrees.  Major university towns will see growing numbers of Chinese buyers as Mom and Dad look for a condo for the student and perhaps a luxury home for use when they visit.  Sometimes a student in the U.S. or Canada is the first step toward relocation.
  • Chinese, who are looking to make a favorable currency play, invest where there is economic value and political stability.  Expect them to continue to gravitate to cities where there are Asian population centers – San Francisco and Vancouver are good examples.
  • Look for very wealthy Chinese, who want status (both here and back home), to snag trophy properties in Manhattan, San Francisco, Los Angeles, Vancouver and a few other major cities with global recognition.
  • The influx of Chinese banks and Chinese construction companies working in the U.S. is bringing Chinese into a variety of new metro markets, some large, some mid-sized.
  • Markets ravaged in the downturn are attracting Chinese investors who have pockets full of Yuan and their eyes on the U.S. for residential, as well as commercial and industrial investment. 
  • The EB-5 program, which allows foreigner to invest $500,000 to create ten U.S. jobs and in exchange, receive a U.S. green card, is opening the door to more wealthy Chinese.   Although this program is available to people from around the world, the overwhelming majority have come from China.  Expect that to continue.

Depending upon your market, Chinese buyers may represent one opportunity for growing your business in 2014. 


Cash is King!

WSJ
Home sales are rising, largely driven by low inventories, rising consumer expectations, and shrinking distressed inventory.  But wait, aren’t low interest rates the number one factor in increasing property sales?  New research from Goldman Sachs indicates low rates may be slightly less important than many think.

Many buyers are reaching into their pockets to purchase homes with cash.  Goldman Sachs estimates that between 1st quarter of last year and 1st quarter of this year, a whopping 57% of residential sales were all-cash transactions.  However, in a real estate market where the total number of deals is rising, this still leaves room for an increasing number of mortgages for home purchase.  According to just released Federal Reserve data for 2012, the number of loans made to people actually buying homes (as opposed to refinancing), increased by 13%, compared to 2011.  This represented a five year high. 

The Goldman Sachs’ analysis estimates that around 20% of all homes sold before the housing downturn were all-cash sales (approximately 30% of sales by dollar volume).  But over the past seven years, a flood of money into the housing market has resulted in the all-cash share of sales more than doubling.

Whether your customers prefer to buy using a mortgage, or by paying all-cash, the good news is they’re buying!