The recently published Knight Frank/Citi Private Bank Wealth Report 2009 reveals some surprising facts about the attitudes of the world’s wealthy to property investment in the face of the global economic crisis.
The report shows that despite the fact that luxury house prices have fallen around the world, there is still a healthy appetite for property investment among the ranks of the world’s super-rich.
Luxury Modern "Villa Hill" in Maribor (Podravje - Slovenia).
Of the 2,000 high net-worth individuals who took part in the Attitudes Survey, as many as 55% of them plan to increase their residential property portfolios over the next two years, despite the fact that the majority have seen their property portfolios drop in value during the last year. Many still regard property as a crucial part of their portfolios and only 5% said they were “very concerned” about the fall in property values. Property experts predict that prices will start to stabilise within the next couple of years and many investors hope this will put the market on a firmer footing.
Seasoned investors are watching the market closely, particularly in regions where property values have been the hardest hit. They know that the bottom of the downturn is just around the corner and are beginning to reinvest, but they are looking for bargains in the form of heavily discounted properties, particularly in the commercial and new-build sectors. Knight Frank reports that a number of those who responded to the survey said that their clients were actively looking to take advantage of distressed sales to acquire stable assets with good yields as cheaply as possible.
Around 50% of the survey respondents said that they planned to increase their investments in the commercial property sector, which has been affected by the global economic problems. It is clear that shrewd investors with spare funds see this sector as one offering a considerable amount of growth potential, particularly the good quality property in prime locations.
Liam Bailey, head of residential research at Knight Frank, said, “Even though our Attitudes Survey, which monitored the decisions and attitudes of 2,000 of Citi Private Bank’s richest clients, shows that the vast majority of high-net worth individuals’ property portfolios has fallen in value, the rich seem less concerned about this than the decline in other investments.” The survey also showed that confidence in equity and hedge fund investments has declined significantly. Almost 100% of those represented by the survey had reduced their exposure to hedge funds.
James Gonzalez, Market Analyst at Obelisk Investment Property, says that the survey results are good news for movement within the property market. “As Knight Frank discovered, it is the tangible nature of property which makes it still attractive to investors, despite everything. Even though values have dropped, investors still have confidence in property as a good long-term investment. That is positive news all round.”
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