Property Investment is a world market, driven by the international nature of wealth creation. Digital entrepreneurs, commodity traders and owners of natural resources are unlikely to stay at home. Their wealth, lifestyle and – increasingly – education, lead them to own homes in the most dynamic world cities.
It’s a trend that is set to increase as wealth creation gathers pace. The 2013 Credit Suisse Global Wealth Report found that global wealth has more than doubled since 2000, reaching a new all-time high of $241 trillion. Economic growth is also becoming far more widespread. Next year, the IMF expects emerging and developing markets to grow by 5.6 per cent, with China growing by 7 per cent. But that doesn’t put more established economies out of the picture. In the US, which already has over 5.2 million millionaires, there will be nearly half a million more by the end of this year.
According to Stephanie McMahon, who is Head of Research at Strutt & Parker, as wealth creation becomes more global, there will be more diversity in the property aspirations of the rich.
‘With the volatility we are likely to experience around the world, caused by the rebalancing of the global economy, the sources of wealth and the types of property investors we see are likely to become even more varied,’ she says.
Today’s millionaires will be tomorrow’s billionaires. So who will be joining the next generation of superprime property buyers?
THE FEMALE ENTREPRENEUR
A growing number of millionaire property investors are women. In the US, the number of wealthy women is growing twice as fast as the number of wealthy men. According to Forbes magazine, almost half of American millionaires are now women and 48% of estates worth more than $5 million are controlled by women. At the moment, 60% of female millionaires have earned their own wealth – this percentage is expected to increase.
According to Oliver Williams from WealthInsight, a research company that specialises in the wealth sector, while the number of millionaires is growing rapidly in ‘frontier markets’ – economies that are at the very beginning of dynamic change, such as Vietnam and Myanmar – these are predominantly ‘lower-tier’ millionaires with a net worth of between $1million and $4 million. However, they have already developed a taste for London property, buying in central neighbourhoods that border the most sought-after addresses, such as Marlyebone and Fulham. As the more successful accumulate wealth, they will make the move to super-prime areas.
THE YOUNG AND GIFTED
New millionaires are likely to be young. This is especially so in Africa, says Oliver Williams, as a result of the continent’s youthful population. ‘The new millionaires coming out of emerging countries are normally entrepreneurs and therefore first-generation wealth,’ he explains. ‘This is particularly the case in fast-growing countries, such as Nigeria, where 63% of ultra-high-net-worth individuals are entrepreneurs.’
THE TROPHY SEEKERS
‘You do get people buying super-prime property as a trophy asset,’ observes Stephanie McMahon. “Owning your own building in Mayfair or Belgravia is a draw for certain buyers, particularly those with significant architecture.’ Owners of these properties tend not to sell them, holding on to their buildings as a way of preserving wealth for the next generation.
The Credit Suisse Global Wealth Report pointed to 11 countries where superior growth is expected between now and 2060. These are: Bangladesh, China, Egypt, India, Indonesia, Iraq, Mongolia, Nigeria, the Philippines, Sri Lanka and Vietnam. These countries have young populations and are resource rich. Many of these, along with the fastest-growing countries in the ASEAN bloc, such as Thailand and Malaysia, are trading countries. Buying and selling is a way of life, and the same applies to property investment. These investors are happy to buy off-plan at property presentations in Singapore, Kuala Lumpur and Hong Kong. They are unlikely to be sentimental about bricks and mortar: if a discrepancy occurs in the market, they trade up or out.
Published by Strutt & Parker 2014
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