SAVILLS WORLD RESEARCH 2014
AROUND THE
WORLD IN DOLLARS
AND CENTS
HOW PRIVATE MONEY MOVES AROUND THE REAL ESTATE WORLD
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“GLOBAL REAL ESTATE IS
MOSTLY RESIDENTIAL AND HELD
BY OCCUPIERS. BUT IN THE
WORLD OF TRADED INVESTABLE
PROPERTY, PRIVATE OW NERS ARE
BECOMING MORE IMPORTANT
THAN INSTITUTIONAL AND
CORPORATE ONES.”
YOLANDE BARNES, SAVILLS WO RLD RESEARCH
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THE WORLD OF
REAL ESTATE
W
e estimate that the value of all world real estate totals around US$180
trillion. Most of this is directly owned residential property and most
of that (72%) is owner occupied. About 17% of it is commercial property.
Investable commercial property totals around US$20 trillion, of which
about half is owned by private individuals, either directly or indirectly,
and the re mainder by corporate and institutional investors. At the core of
this privately owned re al estate is directly owned property holdings, held
individually rather than through other investment structures. To our
knowledge, these holdings have never been measured against commercial
and corporate real estate before. Most direct real estate holdings owned
by the world’s 200,000 private, ultra-high-net-worth individuals (UHNWIs)
are in re sidential property, while commercial properties tend to be held
non-directly, in corporate or other investing entities. Accounting for
just 0.003% of the world’s population, the re al estate holdings of these
UHNWIs together total over US$5 trillion, or around 3% of all the world’s
real estate value. This report examines how privately wealthy individuals
are becoming an increasingly important force in the world of re al estate.
Source: Savills World Research Estimates
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SAVILLS WORLD RESEARCH 2014
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This Spotlight report is published on behalf of Savills plc by Casella Productions Ltd. This report is for general informative purposes only. It may not be published, reproduced or quoted
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Investment Advice: The infomation and opinions contained in this magazine do not constitute professional advice and should not be relied upon. Specific advice relating to your individual
circumstances should be obtained.
WELCOME
RISE OF
PRIVATE
WEALTH
Deals have trebled
since 2009
06
RICH PICKINGS
Gobal real estate
and private
wealth creation
08
WHO BUYS
WHAT, WHERE
Type and region
are crucial
11
WORLD WEALTH
FLOWS
UHNWI luxury
hot spots
14
CHINESE
INVESTMENT
Security and
diversity are key
18
DESTINATION
NEW YORK
Healthy and
attractive returns
19
REAL ESTATE
TRENDS
Regions playing an
important role
20
SUMMARY
& OUTLOOK
The future for
global real estate
21
In this report, we take a look at private real estate
ownership and its impact on global market behaviour.
In particular, we investigate where wealth is being
created, how much of it is invested in real estate, by
whom, where and what type of asset is being bought.
We have focused on this because we believe that
private wealth is having an important effect on the
world property stage, and up until now it has not been
studied as fully as corporate or institutional wealth.
We are pleased to be partnering with Wealth-X on this
project as they are premier providers of information
on the private wealth sector. To gether we measure
the impact of ultra-high-net-worth
individuals (UHNWIs) alongside
more conventional measures of
property investment fl ows and we
predict how they may continue
to change the face of world real
estate in future.
Yolande Barnes
Director
Savills World Research
Wealth-X is pleased to partner with Savills in
presenting the fi rst comprehensive study on real
estate investment by the world’s UHNW community.
At a time when ultra wealthy populations and asset
growth are accelerating, this report is essential reading
for anyone tracking the impact of UHNW investment
on the global real estate markets. Wealth-X is uniquely
positioned to provide global insight on the world’s
UHNWIs by using our extensive database of hand-
curated intelligence on those with net assets of at
least US$30 million. Our studies have shown that the
UHNW population reached an all-time high of 199,235
individuals with a combined wealth
of US$27.8 trillion in 2013. We
predict this population will grow
by 22% by 2018 and its assets by
over 30%, presenting abundant
opportunities for those involved in
global real estate investment.
Mykolas D. Rambus
Chief Executive Officer
Wealth-X
4 www.savills.co.uk/research
AROUND THE WORLD IN DOLLARS AND CENTS
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T
hroughout history, the
accumulation of wealth
has often gone hand
in hand with the acquisition
of land. Status and power in
cultures as diverse as feudal
Japan, medieval Europe
and dynastic China were
inextricably woven with the
ownership and control of
land. Later industrialisation
saw the acquisition of land
and the construction of
grand houses. These were
a hallmark of new wealth
for those who wished to
acquire the lavish trappings
of the more established
moneyed-classes.
STAT US SYMBOL
In the current post-industrial
era, there is a looser fit
between land and power but
real estate, especially an
individual’s private residence
or residencies, still remains a
status symbol for many. A
global real estate market has
emerged among UHNWIs,
many of whom are worldwide
players in their hunt for a
business base as well as
investments in residences
and second homes.
This means that a growing
population of UHNWIs
around the world are having
a significant effect on real
estate markets at a global
level. It is important for those
involved in the global real
estate world of cross-border
investment to understand
this particular strand of
investor behaviour.
Meanwhile, the corporate
and institutional ownership
and acquisition of real estate
globally that once dominated
property markets, suffered a
setback in 2008 as credit
markets shrank and the
availability of debt funding for
property deals diminished.
The co-incidence of the rise
of private wealth, particularly
in the “new world” and
diminished debt availability,
especially in the “old world”
has been a fortuitous and
game-changing combination.
COMMERCIAL SIDE
Sovereign wealth funds,
wealth management
companies, private banks
and family offices have
stepped into the property
deals that corporate bankers
have deserted.
Indeed the general
willingness of private wealth
to take the place of debt
fi nance or to take higher-risk
development positions is
now making the difference
between deals done or
schemes mothballed.
This means that the tastes
and preferences of private
buyers are having an impact
not only on the so-called
“investments of passion”
– the mansions, holiday
homes and landed estates,
for example – but also on
commercial property
transactions that would have
been the domain of the
corporate sector just 10
years ago.
It is this “serious”,
commercial side of private
real estate in which we are
especially interested. The
propensity for UHNWIs to
take real estate exposure,
their preferences and tastes
in doing so and their
behaviour, either in direct
property ownership or
through family offices and
other commercial entities, is
changing the face of all real
estate: offices, industrial,
residential, retail as well as
“niche” projects.
FOR CENTURIES, POWER, WEALTH AND
LAND HAVE BEEN INEXTRICABLY LINKED
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THE RISE OF PRIVATE
WEALTH IN REAL ESTATE
THE IMPORTANCE OF PRIVATE WEALTH IN LARGE REAL ESTATE
TRANSACTIONS AROUND THE WORLD HAS GROWN NEARLY
THREEFOLD SINCE 2009
To tal UHNWI wealth held as real estate by global region
Source: Savills World Research / Wealth-X
T
he growth in numbers
of UHNWIs has been
significant, reaching
almost 200,000 in 2013,
with a combined wealth of
$27.8 trillion. Wealth-X has
forecast that this will exceed
$40 trillion by 2020. The map
below illustrates the global
distribution of this wealth
and how much of it is held
in real estate. It shows that
the propensity to own real
estate directly is greatest in
EMEA (particularly in Europe).
In contrast, North Americans
(particularly in the US) own
relatively small proportions
of real estate in relation to all
holdings, because financial
instruments are preferred.
Private wealth has
become increasingly
important in large real estate
transactions globally and
has grown nearly threefold
since 2009. Private
investment deals are taken
here to mean privately funded
property companies and
REITS. The majority of these
transactions are in
commercial property sectors
not usually associated with
the so-called “investments of
passion”. This is an important
trend, showing private wealth
has a commercial edge. It is
now the lead form of finance
being used in over half of all
Importance of private wealth in real estate investment,
by number of transactions
Source: Savills World Research / Real Capital Analytics (RCA)
UHNWI total wealth
and holdings (US$ trillions)
Non real estate holdings
Real estate holdings
10
5
1
the figures below refer to
the green segment
$0.63TRN
$0.16TRN
$0.04TRN
$1.80TRN
$0.23TRN
$2.39TRN
$0.08TRN
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AROUND THE WORLD IN DOLLARS AND CENTS
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the world’s biggest property
transactions – each worth at
least US$10 million.
Private wealth is more
commonly used in local deals
than cross-border deals. A
smaller proportion of
international transactions, by
one nationality into another,
was undertaken by private
companies/individuals than
was the case in local
transactions. Having said
this, about 30% of all large
cross-border deals were
led by private wealth in
2012. Many more will have
had a portion of private
wealth investment.
The most notable trend
is that private wealth is
becoming more important
in the world of real estate
overall. Whereas it
constituted around 45% of
the large deal world market in
2007 and 2008, this
contribution has now grown
threefold in absolute terms
and by nearly a quarter in
proportional terms.
The number of all global
“big deal” (US$10 million+)
transactions fell to a low point
of 7,400 in 2009, worth
around US$400 billion. By
2012, these numbers had
recovered by 10% to above
2007 levels at US$900 billion
in 18,000 transactions. This
was largely due to the
injection of private wealth
over the period.
We estimate that the
increasing participation of
private wealth has meant that
transactions in 2012 were
6,200 and US$190 billion
higher than would otherwise
have been the case. So, had
private transactions not
increased and the property
world remained reliant on
corporate sources of
investment finance, 2012
transactions would have
been 35% lower than they
actually were.
PRIVATE VS CORPORATE
INVESTMENT
The amount of money
invested annually in world
real estate transactions of
over US$10 million has not
been as great among
corporate and institutional
investors as it has been
among private companies
and individuals.
Overall transaction
numbers in the corporate
sector are still below 2007
levels, while those in private
real estate deals are now
nearly a third higher. Only
in cross-border trade
do corporate investors
still predominate.
Most of the growth in
private wealth flows to real
estate emanate from Asia.
Private Asian transactions
are now over three times
that of 2007. Looking in
more detail at cross-border
fl ows of private wealth in
real estate, there are
distinct differences in the
behaviour of Asian traders
versus others.
Real estate in Europe is
much more likely to attract
private capital from
overseas so it experiences
a net inflow of funds for real
estate deals from private
sources. Asia, on the other
hand, is a net exporter of
private capital in real estate.
Private Asian investors buy
more real estate overseas
than is sold to cross-border
investors in Asia.
This situation is a
complete reversal of 2007
when Asia was a recipient
of private cross-border
activity and EMEA an
exporter of funds into
property. This reversal can
be partially explained by
weakening EMEA Forex
rates and strengthening
Asian currencies, as well as
increasing opportunities in
the EMEA region due to
the weakness of local
investing institutions.
It is important to note
that private wealth behaves
differently to corporate
entities in the cross-border
sphere. This switch in Asia
from importer to exporter
of funds is much less
pronounced outside the
private sector and EMEA
has remained an importer
of funds among corporate
entities. This is a clear
example of how private
sector wealth displays
distinctly different
characteristics to the
corporate sector.
Corporate investment in
global real estate
Private wealth investment in
global real estate
US$ billions
US$ billions
Net flow of private cross
border investment
Net fl
ow of all cross border investment
Source: Savills World Research / RCA
US$ billions
Net exporter Net importer
US$ billions
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Average age of UHNWIs with real estate as their
primary industry
THE BRICKS AND
MORTAR
BILLIONAIRES
The creation of wealth by real estate entrepreneurs may
not be especially large on the global stage at present
but it is extremely lucrative
Source: Savills World Research / Wealth-X
Real estate wealth held by UHNWIs, proportion of
total wealth
O
nly 5.4% of the
world’s UHNWIs
made their money
primarily from real estate but
those that did are worth, on
average, twice that of their
non-real estate counterparts.
It would appear that it
takes time to make money
from property. The average
age of UHNWIs whose
primary industry it is was
60, compared to 58 for all
UHNWIs generally.
Those most likely to have
made money this way
were found in Oceania,
where 8.2% of all UHNWI
wealth was created in real
estate activities. Australia,
in particular, seems to
have offered opportunities
in the past to real estate
entrepreneurs. They have
been instrumental in the
development of major
cities, urbanisation and
resort development, which
happened some while ago,
so the average age of the
property mogul here is 65.
Meanwhile, only 4.3% of
African UHNWIs have real
estate as a primary industry.
It would appear that the
immaturity of the market
here has meant that this is
not a big source of private
wealth in comparison to
other sectors. However,
the maturation of property
markets in Africa may well
change this in the future and
provide more opportunities
for wealth creation.
A higher than average, 6.7%
of Asian UHNWIs have real
estate as a primary industry.
The total wealth of these
individuals is US$1.8 trillion
and their average holdings
US$610 million each. This
compares to an average
holding by all global UHNWIs
generally of US$139 million.
So Asian markets appear
to be the most lucrative in
which to create a real estate
fortune, and the average age
of UHNWIs is younger at 55.
Proportion of wealth
Proportion of UHNWIs
Average Age
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AROUND THE WORLD IN DOLLARS AND CENTS
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HOLDINGS AND FLOWS
When it comes to real estate, the world is top heavy. The vast majority of big ticket
deals and UHNWI holdings are in the northern hemisphere, in transparent, higher
value markets. Europe is tops for UHNWI residential holdings, and has been the
major beneficiary of commercial cross border capital. Domestic money in North
America and Asia has driven commercial investment in these regions.
AUSTRALIAN
ENTREPRENEURS HAVE
BEEN INSTRUMENTAL
IN THE DEVELOPMENT
OF MAJOR CITIES
AND RESORTS
Source: Savills World Research / RCASource: Savills World Research / Wealth-X
UHNWI residential holdings Commercial inflows: 2007-2013
US$ billionsUS$ billions
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Ownership of residential property among UHNWIs
Source: Savills World Research / Wealth-X
Types of big ticket real estate transactions
Source: Savills World Research / RCA
A WORLD OF CHOICE
Big ticket investors share a penchant for offices, retail and residential
in most places except Asia where land is king
L
arge real estate deals
in 2013 have been
distributed across the
globe in similar proportions
between sectors – with
the notable exception of
development land. This
sector is tiny in EMEA
and the Americas, but
completely dominates
real estate markets on
the Asian continent. The
transfer of land ownership
from the state in China
plays an increasingly big
part in Asian deals.
In the world of
commercial and cross-
border investable real
estate, offices continue
to dominate the large
deals, with retail coming
second – except in the
Americas where residential
apartments in purpose-
built blocks designed for
letting are favoured ahead
of retail property. Industrial
units and hotels represent
small asset allocations in
all jurisdictions, by value.
Residences (as opposed
to letting portfolios) are not
included in the graph.
In the world of private
wealth, residential property
forms an important
component of real estate
portfolios. We have
identified total global
residential holdings of
US$5.2 trillion among
UHNWIs, averaging US$15
million apiece. The total
value of all these held by
UHNWIs globally amounts
to more than the total value
of all residential property
in France.
Between them, European
and Asian internal
investment in residential
real estate makes up
nearly half of the global
investment of UHNWIs
into residential real estate.
These two regions also
play the biggest roles in
investing into other regions.
Asia with its investment
into Europe and North
America, and Europe into
North America and Latin
America. The biggest inter-
regional investment is from
Europe into North America
(US$160 billion).
Geographically, the
highest levels of UHNWI
residential property
ownership are in regions
from which individuals
originated. Europe stands
out as the top region for
residential holdings by
value with US$2.4 trillion
followed closely by Asia
at US$1.8 trillion. This
shows UHNWIs prefer
to invest in “what they
know”. UHNWIs from the
“old world” (North America
and Europe) are much
more likely to hold multiple
residential properties in
direct ownership than
those from Africa and
Asia. This is reflected in
the concentrations of
high-value enclaves and
“billionaire boltholes” found
in Europe and America, as
revealed in our analysis of
who buys what, where.
UHNWIS HAVE
GLOBAL REAL ESTATE
HOLDINGS OF
US$5.2 TRILLION
US$ billions
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AROUND THE WORLD IN DOLLARS AND CENTS
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WHO BUYS
WHAT, WHERE
Not only has the participation of private sector investment increased, but
the importance of certain global regions in real estate has increased too
In 2007, Asian participation
in big-ticket commercial real
estate deals was 22% of the
market by value. Since 2010,
it has averaged 50%. Most of
this increase has been from
the private wealth sector. At
least 45% of all big-ticket
real estate deals in Asia were
made by private individuals
and private companies.
It is perhaps unsurprising
that the participation of
private Asian wealth has
been so great in real estate
of late. Around 7% of all
UHNWIs in the region made
their fortunes from the sector.
This is a higher proportion
than in any other global
region apart from Oceania.
Asian UHNWIs have made
more money from real estate
than other nationalities.The
average total wealth of those
making money from real estate
in Asia is US$610 million.
Most UHNWIs direct
property holdings are homes
(including multiple second
homes). North Americans
have overwhelmingly invested
in this type of property and
Asians too are similarly
conservative in their direct
property holdings. Other
types of property are more
likely to be held in companies
and other investing vehicles
than held directly.
Other nationalities have
more significant direct
holdings (up to 20%) of other
types of property. Europeans
and Oceanians are more
likely to hold farms, estates,
ranches. Likewise Africans
will hold land: rural, resort
FOR
SALE
US$
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Source: Savills World Research / Wealth X
Value of property by region of origin
UHNWI’s direct property holdings by type
UHNWI direct property holding by region of originor urban, in direct ownership and Latin
Americans will hold commercial property
directly. Middle Easter ners seem to have
around 17% of their directly owned
property in a well-balanced mix of real
asset types. It also has the highest
average value at over US$35 million,
while North American holdings are much
lower in value, averaging US$5 million.
Most holders of direct real estate
are more likely to own it in their home
region than anywhere else – this is
overwhelmingly the case for North
Americans. Latin Americans, on
the other hand, are exceptional in
eschewing their homeland in favour
of direct holdings north of the border.
Africans are the next most likely to
invest somewhere other than their
home territory and when they do they
favour European destinations. Asians,
Europeans and Oceanians are all most
likely to buy in North America than
any other global region when investing
overseas, followed by Europe. There
would therefore seem to be a preference
for “safe haven”, old world destinations
for direct real estate holdings among
UHNWIs.
The overall value of direct property
holdings is highest in Europe, partly due
to the number of investors, but also due
to high average values in the region.
The number of Asian UHNWIs with
direct property holdings is smaller, even
though the average value is higher.
US$ trillions
US$ millions
OVER 45% OF
ALL BIG TICKET
REAL ESTATE
TRANSACTIONS
IN ASIA
WERE MADE
BY PRIVATE
INDIVIDUALS
AND PRIVATE
COMPANIES
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REGIONAL TRENDS
Wealthy Europeans and Asians are the most likely to
influence the world of real estate directly and increasingly
they are turning their attention to cross-border deals
Largest recipients of private cross border capital,
and % of all private capital 2012/13
Source: Savills World Research / RCA
Proportion of wealth held in direct real estate 2012/13
Source: Savills World Research / Wealth-X
R
eal estate is most important to the
total wealth holdings of European,
Asian and Middle Eastern
UHNWIs where more than a quarter of
wealth is held in this form. It is however
wealthy Europeans and Asians who
are most likely to influence the world of
real estate directly. American UHNWIs
have the potential to do so by vastly
increasing their direct property holdings,
but at present they are more likely to
influence it through fi nancial instruments
rather than direct investment.
When it comes to the individual
countries that receive most cross-
border real estate investment, the US
stands out as a significant international
market with over US$9 billion invested
in big ticket deals in 2012/13.
The UK is the second largest recipient
of cross-border investment after the
US, with over US$7 billion large deals
done in 2012. This inward investment
represents nearly half of all UK deals,
establishing it as a major cross-border
market, ahead of China, where cross-
border real estate investment is a tiny
(circa 1%) share of all property deals.
Overall, Europe is a major recipient
of overseas investment. This is not
only because of Europe’s high values
relative to the rest of the world but
also because of its established and
transparent markets. It is noteworthy
that the only “new economies” that
feature in the top countries for cross-
border investment are China (through its
sheer size), Singapore and Russia.
US$ billions
% of all private capital
US$ trillions
Proportion of net worth
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W
ith the importance
of private wealth
growing in all areas
of real estate investment, we
believe that understanding
the geography and
preferences in the residential
sector can shed light on
UHNWI investment behaviour
in other sectors too.
The map above shows the
major locations around the
world favoured by UHNWI
buyers of residential real
estate. It highlights not only
where they like to live but
also the geographies and
jurisdictions that they might
favour for other types of real
estate holdings — and other
investments — as well.
Most notably, when it
comes to residencies,
UHNWIs may invest cross-
border but they will tend to
stick to destinations within
their global region, to areas
they call “home”. North
Americans are the most
loving of their home nation Source: Savills World Research / Wealth X
THE FLOW
OF WEALTH
We pinpoint the major locations
around the globe favoured
by UHNWI buyers of luxury
residential real estate
Region of Origin
Top cities for residential
property
Africa London
Asia
Hong Kong, Singapore,
Mumbai, London
Europe
London, New York,
Moscow, Monaco
Latin America Miami, New York, Los Angeles
Middle East Dubai, Abu Dhabi, London
North America
New York, Los Angeles,
Miami, San Francisco
Oceania Sydney, London
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and overwhelmingly favour
the US. Latin Americans are
similar but will also venture
northwards to cover the
entire American continent,
including the Caribbean.
Africans, Asians and those
from the Middle East are also
concentrated in their own
regions but Europeans are a
little more widely dispersed.
The more established
wealth of Europe seems best
versed in the notion of global
home-ownership. Not only is
Europe itself full of billionaire
boltholes but Europeans
themselves venture to many
luxury island resorts in the
Caribbean and the Far East
as well as into parts of the
US and Canada.
One city that stands out as
an extraordinary exception
when it comes to overseas
residencies is London. This
city is a second home to
UHNWIs from all regions
of the globe. This buyer
behaviour in residential real
estate both reflects and
has a knock-on effect on
other types of real estate
ownership too. London
is a large part of the UK’s
dominance in cross-border
real estate investment of all
types. Residential property
is just a part of this global
city phenomenon.
EUROPEANS SEEM WELL VERSED IN
THE IDEA OF GLOBAL OW NERSHIP
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UHNWIs buy residential real estate for a variety of
pursuits, climates and attractions
GLOBAL HOT SPOTS
T
here are a significant
number of hot spots
around the globe
where UHNWIs will invest.
These hot spots fall into
three categories: cities,
retreats and destinations.
Global cities are
important for UHNWIs as
this is where wealth is
made, stored and invested.
UHNWI home ownership in
these cities closely reflects
and underlies a predilection
for other types of real
estate investment in the
same cities – and probably
other types of inward
investment as well. The
selection of a city as a
home often reflects other
fi nancial commitments
there. Top cities, by the
size of residential
commitments are New
York, followed by London,
Hong Kong and Singapore.
Global retreats are many
and varied, including
islands, coastal resorts,
lakes and countryside. The
top location, by the value
of UHNWI homes found
there, is the Caribbean.
Many other retreats are
part of the city scene,
acting as weekend
boltholes from places of
work and business. The
US has many examples of
these, the Hamptons,
Winnetka and Nantucket
Island for instance.
Destinations of the
wealthy have evolved for
many reasons, mostly
related to pursuits such as
skiing, hunting, shooting,
fi shing, golf, wine and
sailing. Places as varied
as Aspen, Colorado and
the Scottish Highlands fall
into this category. Some
are related to specific
business types, for
example, tech industries,
tax havens, film-making or
even politics. All are
characterised by high-end
housing in exclusive
environments, such as
Beverly Hills, Monaco and
Bethesda, Maryland.
The emergence of
retreats and leisure
destinations is a nascent
market in Asia. The
development of resorts to
rival Europe’s sun and ski
playgrounds is only just
beginning in the East;
Japan’s ski resorts and
China’s Hainan Island
being rare examples.
CITIES AND THEIR
RETREATS DOMINATE
THE UHNWI MAP
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TOP 30 ENCLAVES RANKED BY AVERAGE
VALUE OF UHNWI INVESTMENT
Source: Savills World Research / Wealth X
Destinations
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In London, ABP China recently made a £1 billion direct investment in a 35-acre site in the Royal Docks to deliver a
3.5 million sq ft office complex targeting Chinese businesses. In New York, Soho Property has spent more money on
Manhattan real estate than any international investor in the last three years. Soho’s purchases included a partnership in
a 40% stake in America’s most valuable office tower, the General Motors Building, for $700 million. Partnering with a
local player is a common approach, tapping into native market knowledge, while a minority stake can avoid higher taxes
triggered when a non-domestic entity has a controlling stake in some markets, notably the US.
C
hinese cross-border
investment into global
real estate markets
has risen rapidly since the
global financial crisis of 2008.
Wealthy Chinese individuals,
with limited investment
opportunities at home, have
increased their overseas
investment rapidly as they
have sought to diversify
portfolios, seek capital
security and find a foothold
in international markets.
Mainland China, when
combined with Hong Kong
(through which a large
proportion of mainland China
investment passes) is the
second largest source of
cross-border real estate
investment in the world after
the US. In 2013 to date,
$23.7 billion cross-border
investment has flowed from
China and Hong Kong.
Money invested directly from
Hong Kong is now down
42% on 2007 volumes, but
Chinese direct investment is
up 1165%.
Private capital is
particularly important in the
domestic Chinese market.
China saw $152 billion
private capital investment
in the year to October
2013, according to RCA,
accounting for half of all
transactions in the period.
This is well ahead of even the
US, where private capital
transactions stood at $85
billion in the year to date,
accounting for 34% of
all transactions.
It is this private capital,
particularly money flowing
GLOBAL CHINESE
INVESTMENT
Wealthy Chinese individuals look to international markets for capital
security and to diversify their portfolios
into domestic property, that
was in the first wave of
Chinese cross-border
investment. Those Chinese
with overseas business
interests were among the
fi rst to invest abroad,
followed by a second wave
of buyers seeking property
for their offspring (often
bases for student children),
or to achieve permanent
residency.
These buyers sought out
established, international
markets in jurisdictions that
have cultural ties with China
or with a large Chinese
migrant population. Hong
Kong, Macau and Singapore,
have been followed by other
top tier global cities with
Chinese diasporas such as
Vancouver, London and Los
Angeles. We anticipate that a
third wave of investors
seeking income will follow,
chasing higher yields in a
wider range of locations than
previously.
By total value, it is the big
ticket investments by
Chinese institutions that are
really starting to make waves.
Major investments in
commercial projects,
development sites and
trophy buildings have been
made around the globe. The
biggest deals have taken
place in the US and UK,
followed by Singapore,
Japan and Australia. Chinese
buyers have taken advantage
of the revaluing of real estate
assets in North America and
Europe to snap up what look
like bargains in currency
exchange, comparative
pricing and yield terms.
Cross-border capital originating from Hong Kong and China
Source: Savills World Research/ RCA
US$ billions
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N
ew York stands out
among world cities as
receiving the largest
share of UHNWI investment
in direct residential property,
and it seems set to grow
further as a destination
for private investment.
This is particularly true
for mainstream property,
especially in terms of income
return. New York fell in
rank from one of the most
expensive to a distinctly
“cheap” old world urban
centre after 2007, but one
with significant capital value
growth potential.
This has set the scene
for a wave of cross-border
investment in the city’s
commercial real estate. New
DESTINATION NEW YORK
The Big Apple’s healthy residential and commercial real estate returns
are attracting investors from across the world
Source: Savills World Research / RCA
Manhattan commercial deals over US$10m (year to Oct 2013)
York is the largest global
real estate market by sales
volume, a position it has
held since 2010, according
to RCA. Much of the wealth
fl owing into New York is
from foreign sovereign
wealth funds and private
individuals. The biggest
foreign investor in New York
real estate in recent years
has been Zhang Xin, through
her company SOHO China,
which has spent more on
Manhattan real estate than
any international investor
in the last three years.
Pension funds from Korea
and Canada have also been
particularly active, while the
Kuwaiti sovereign wealth
fund is part of a consortium
US$ billions
of investors behind the huge
Hudson Yards scheme.
International lenders have
been active too, but their
profile has changed. Pre-
crunch, the big property
lending banks came from
Ireland, Switzerland and
France. Today the major
players are from Germany,
China and Hong Kong.
Although smaller by
monetary volume, some of
the most significant fl ows of
private capital by number
of transactions into the US
have been into residential
real estate. Foreign nationals
accounted for $68.2 billion,
or 6.3%, of the $1.08 trillion
spent on US residential real
estate between April 2012
and March 2013, according
to the National Association
of Realtors. Chinese buyers
are increasingly common
— they grew from 5% of
all international residential
buyers in 2007 to 12%
in 2013. Aside from the
Chinese, notable buying
groups in the top tiers of
the New York residential
market include Russians,
and Eastern Europeans and
wealthy Latin Americans.
US tax policy is still cited as
a major hurdle to international
investors, both in the
residential and commercial
sectors. Proposed changes
would set the scene for
significantly more investment
waiting in the wings.
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WORLD TRENDS IN
REAL ESTATE
Asia and Africa with their high concentrations of UHNWIs will
play an increasingly important role in real estate investment
A
mong those
UHNWIs who have
made their money
from real estate, there is
a higher concentration of
very high levels of wealth
in Asia and Africa than in
the Americas and EMEA.
The higher proportion of
near-billionaires in these
regions points to the
likelihood of continued
growth in UHNWI numbers
and, consequently, to their
increasing importance in
the sphere of global real
estate investing.
The appetite for real
estate as an investment
class by Asian individuals
in particular means that the
phenomenon of privately
invested real estate will
continue to grow as the
number of Asian UHNWIs
grows.
Our analysis suggests
that this, in turn, will
mean higher activity in
development land and
private cross-border
activity generally.
There is a big question as
to whether private wealth
can continue to grow as a
proportion of all big ticket
real estate investment. It
would seem that it has
played a bigger part in the
past within the totality of
cross-border deals.
Given that the number
of UHNWIs is due to grow
fastest in Asia, it is the
investing preferences and
attitudes of this group
that will determine how
this trend develops in
future. Because of Asia’s
greater propensity for both
real estate purchase and
overseas investment in
real estate, we expect the
proportion of private wealth
participation in cross-
border deals to grow.
Private wealth as a proportion of all
real estate investment
Source: Savills World Research / RCA
Wealth distribution within the UHNWI population
who made their money in real estate
Source: Savills World Research / Wealth X
Private Wealth Invested as a Proportion of
Total (by Value)
THE APPETITE FO R
PRIVATELY INVESTED
REAL ESTATE WILL
CONTINUE
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SUMMARY AND
OUTLOOK
GROWTH
• Private wealth has increased and
changed the nature of real estate
investment since the US financial
crisis took hold.
• It has been an important driver of
global real estate markets, and it is
set to become more important.
• Cross-border real estate
investment by the ultra-wealthy is
currently lower than that from
corporate and institutional buyers,
but has been growing in recent
years – and is set to grow further.
• Private wealth is different to
corporate and institutional money
in terms of target returns, sectors,
jurisdictions and time scales. This
means that it can out-compete
conventional funding sources on
certain propositions.
• In recent years there has been a
tendency for UHNWIs to focus on
trophy properties, including more
residential and niche propositions.
• We anticipate that some UHNWIs
will start to move away from the
“safe-haven” store of wealth
investments, intended primarily
for capital growth and wealth
preservation and instead begin
seeking more productive, long-term
income-producing positions.
NEW MARKETS
• Real estate investment has been
focused on cities rather than whole
countries. This is true for both
private and corporate money.
• These now fully invested in cities
like HK, NY, Singapore and London
may extend their search to other
types of asset in future. This would
benefit real estate markets.
• Only the US cities with long global
reach: New York, Miami and Los
Angeles will see significant cross-
border activity. The main recipients
of private cross-border investment
are European markets rather than
US ones, but Chicago, San
Francisco, Seattle, Washington and
Boston should be on a “watch” list.
• The US market is large and
mature but overwhelmingly
domestic. Its growth prospects will
be diminished because American
UHNWIs will grow more slowly than
those of Asia.
• European real estate markets are
the largest and attracted global
inward investment, relative to size.
Europe is poised to attract more
private property investors who will
be increasingly familiar with the
region’s strong offering in city
properties and well-known
residential destinations.
OPPORTUNITY
• Private wealth may perhaps
be seen as more adventurous
geographically and across sectors
and maybe less adverse to
development risk – given the right
returns. It has ideal characteristics
for the development of new markets
and new products.
• Most future growth in UHNWI
numbers will come from Asia.
Asians are more likely than any
other group to invest in real
estate, to have made their money
from it.
• The “retreat” and leisure-
destination markets are still young
and very small in Asia, but could be
set to explode as UHNWI buyers
increase and mature.
• 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.
• We anticipate that in the future a
growing proportion of large real
estate transactions and cross-
border transactions will involve
privately wealthy investors and
become more diverse in nature
as a result.
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PLEASE CONTACT US FOR
FURTHER INFORMATION
YOLANDE BARNES
Savills World Research
+44 (0)20 7409 8899
PAUL TOSTEVIN
Savills World Research
+44 (0)20 7016 3883
LUCY GREENWOOD
Savills World Research
+44 (0)20 7016 3882
SAVILLS
WORLD RESEARCH
TEAM
Savills World Research monitors, reports and
comments on the world’s real estate markets, using
unique methodologies to build a true picture of
the global market place.
Innovators and recognised thought leaders, the team
draws on Savills local market intelligence and sets it
into a global context.
Regular commentators in the press, we produce
a range of research publications and undertake
bespoke client research projects across a wide
range of geographies and sectors.
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