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<p>DEMAND FOR TROPHY HOMES in global hot spots such as London, New York, Monaco, the Côte D'Azur and Hong Kong is booming again as super rich investors take advantage of softer prices to increase their exposure to real estate. That's one of the trends highlighted in the recently released Wealth Report 2010, an annual collaboration between British-based property group Knight Frank and Citi Private Bank UK. The survey offers interesting insight about high net worth individuals' (HNWIs) attitude towards property as an asset class. </p>
<p>The report shows residential property is currently the most popular asset class among wealthy investors, with real estate accounting for one third (33%) of the investment portfolios of HNWIs worldwide. Equities make up 25% of HNWIs investments, with cash and bonds lagging at 17% and 13% respectively. Gold claims just a 0,5% share of the average HNWI's investment portfolio. </p>
<p>David Poole, head of Citi Private Bank UK, says the tangible and straightforward nature of residential property - especially at a time when the outlook for other asset classes is uncertain - explains the renewed attraction to real estate. He says property is clearly viewed as a strategic investment that can ride out economic cycles. In addition, falling house prices on the back of the global recession has created prime property opportunities for mega-rich buyers. </p>
<p>Says Poole: "Our clients look for opportunities when everyone else is circling the wagons. Buying becomes opportunistic in a downturn, particularly as people turn to hard assets such as property when other assets experience dislocation.'' Poole says rock-bottom interest rates and the "creation" of cheap money via government stimulus packages have also supported money-flow back into property. At the same time, low savings rates have encouraged the wealthy to move investments out of cash and into property in search of better yields. That's starting to drive demand and values upward in many areas. </p>
<p>Liam Bailey, head of residential research at Knight Frank, agrees drops in prices in a number of property markets last year are being viewed by wealthy investors as a buying opportunity. But Bailey warns historic house price data shows such windows of opportunity usually don't remain open for long. </p>
<p>An interesting diversion is appearing in property markets in different parts of the world. While top-end property prices globally fell by an average 5%, some markets have recorded extreme price falls and price increases of more than 40%. </p>
<p>Luxury house prices fell in almost 75% of the more than 50 locations tracked by the Knight Frank Prime International Residential Index (PIRI) in 2009. (See table.) </p>
<p>At the other end of the scale, prices in some Asian cities, such as Shanghai and Hong Kong, rebounded last year by a staggering 52% and 40,5% respectively. However, Bailey says it seems unlikely property prices in Asian cities can continue to grow at those sort of rates. </p>
<p>Prices in New York, Washington DC and London have also started rising again. Bailey says although the global recession has had a huge impact on prime property markets, some of the changes have been more subtle. </p>
<p>For example, the fiscal intervention by the administrations in Beijing and Washington DC means those cities are now viewed as financial as well as admin hubs. That's already having an impact on each city's prime property market, as more banks and property investors gravitate towards them. </p>
<p>The key question still is: How sustainable will an overall recovery in global house prices be? Bailey maintains price growth should be supported over the short term by an undersupply of stock in most prime housing markets. But looking further ahead he believes it's those locations that offer a genuine lifestyle attraction to the world's wealthy - rather than just an investment opportunity - that will prove most sustainable. </p>
<p>Interestingly, the report shows London is no longer viewed among the world's upper rich as the most desirable city in which to work, play, live and invest. London has surrendered its ranking as the world's top city to New York. Knight Frank ranks cities according to various factors, including economic activity, political power, knowledge/influence and quality of life. </p>
<p>Says Bailey: "London's reputation has undoubtedly suffered in light of Britain's new tax legislation and the government's attack on bonuses to high-flying employees." </p>
<p>Monaco remains the world's most expensive housing market for the second year running. Big-ticket properties in Monaco will set buyers back up to €44 000/sq m (R431 200/sq m). See table. </p>
<p>South African estate agents say Knight Frank and Citi Private Bank's latest wealth report confirms prime residential property in SA is still relatively cheap compared with other global destinations. Basil Moraitis, area manager at Pam Golding Properties on Cape Town's Atlantic Seaboard, notes big-ticket properties on this prime stretch of coastline generally sell for between R60 000/sq m and R100 000/sq m. That means Cape Town buyers are still paying around a quarter of the going rate for prime properties of similar size and quality in Monaco. </p>
<p><img src='http://www.fin24.com/downloads/Media/article_images/fweng_img/2007/sep/ee_pri060510.gif'> </p>
<p>The report shows residential property is currently the most popular asset class among wealthy investors, with real estate accounting for one third (33%) of the investment portfolios of HNWIs worldwide. Equities make up 25% of HNWIs investments, with cash and bonds lagging at 17% and 13% respectively. Gold claims just a 0,5% share of the average HNWI's investment portfolio. </p>
<p>David Poole, head of Citi Private Bank UK, says the tangible and straightforward nature of residential property - especially at a time when the outlook for other asset classes is uncertain - explains the renewed attraction to real estate. He says property is clearly viewed as a strategic investment that can ride out economic cycles. In addition, falling house prices on the back of the global recession has created prime property opportunities for mega-rich buyers. </p>
<p>Says Poole: "Our clients look for opportunities when everyone else is circling the wagons. Buying becomes opportunistic in a downturn, particularly as people turn to hard assets such as property when other assets experience dislocation.'' Poole says rock-bottom interest rates and the "creation" of cheap money via government stimulus packages have also supported money-flow back into property. At the same time, low savings rates have encouraged the wealthy to move investments out of cash and into property in search of better yields. That's starting to drive demand and values upward in many areas. </p>
<p>Liam Bailey, head of residential research at Knight Frank, agrees drops in prices in a number of property markets last year are being viewed by wealthy investors as a buying opportunity. But Bailey warns historic house price data shows such windows of opportunity usually don't remain open for long. </p>
<p>An interesting diversion is appearing in property markets in different parts of the world. While top-end property prices globally fell by an average 5%, some markets have recorded extreme price falls and price increases of more than 40%. </p>
<p>Luxury house prices fell in almost 75% of the more than 50 locations tracked by the Knight Frank Prime International Residential Index (PIRI) in 2009. (See table.) </p>
<p>At the other end of the scale, prices in some Asian cities, such as Shanghai and Hong Kong, rebounded last year by a staggering 52% and 40,5% respectively. However, Bailey says it seems unlikely property prices in Asian cities can continue to grow at those sort of rates. </p>
<p>Prices in New York, Washington DC and London have also started rising again. Bailey says although the global recession has had a huge impact on prime property markets, some of the changes have been more subtle. </p>
<p>For example, the fiscal intervention by the administrations in Beijing and Washington DC means those cities are now viewed as financial as well as admin hubs. That's already having an impact on each city's prime property market, as more banks and property investors gravitate towards them. </p>
<p>The key question still is: How sustainable will an overall recovery in global house prices be? Bailey maintains price growth should be supported over the short term by an undersupply of stock in most prime housing markets. But looking further ahead he believes it's those locations that offer a genuine lifestyle attraction to the world's wealthy - rather than just an investment opportunity - that will prove most sustainable. </p>
<p>Interestingly, the report shows London is no longer viewed among the world's upper rich as the most desirable city in which to work, play, live and invest. London has surrendered its ranking as the world's top city to New York. Knight Frank ranks cities according to various factors, including economic activity, political power, knowledge/influence and quality of life. </p>
<p>Says Bailey: "London's reputation has undoubtedly suffered in light of Britain's new tax legislation and the government's attack on bonuses to high-flying employees." </p>
<p>Monaco remains the world's most expensive housing market for the second year running. Big-ticket properties in Monaco will set buyers back up to €44 000/sq m (R431 200/sq m). See table. </p>
<p>South African estate agents say Knight Frank and Citi Private Bank's latest wealth report confirms prime residential property in SA is still relatively cheap compared with other global destinations. Basil Moraitis, area manager at Pam Golding Properties on Cape Town's Atlantic Seaboard, notes big-ticket properties on this prime stretch of coastline generally sell for between R60 000/sq m and R100 000/sq m. That means Cape Town buyers are still paying around a quarter of the going rate for prime properties of similar size and quality in Monaco. </p>
<p><img src='http://www.fin24.com/downloads/Media/article_images/fweng_img/2007/sep/ee_pri060510.gif'> </p>
