Business & Investment

Who Will Buy London’s Super-Prime Property?

Where wealth is created tends to have a direct impact on super-prime property. In today’s increasingly global world, digital entrepreneurs, commodity traders, and owners of natural resources are unlikely to stay at home. Their wealth, lifestyle and increasingly, international education, predisposes them towards owning homes in the world’s most exclusive cities. London, with its safe haven status, transparent financial and legal regulations and moderate taxation, is an attractive destination, particularly for millionaires from emerging countries whose cities can’t match this quality of life.

As for millionaires, there will be more and more as the global economy expands. Economic growth has an accelerator effect: the 2013 Credit Suisse Wealth Report found that global wealth has more than doubled since 2000, reaching a new all-time high of 241 trillion US dollars.

Next year, the IMF expects emerging and developing markets to grow by 5.6 percent. China will grow by 7 percent. Even the more advanced economies will collectively grow by 2.3 percent. In the US, which already has over 5.2m millionaires, there will be nearly half a million more by the end of the year.

According to Stephanie McMahon, Head of Research at Strutt & Parker, the world’s wealth is polarizing, and the differences between the haves and the have nots are becoming more extreme.” I think with the volatility we are likely to see around the world as Quantitative Easing and emerging markets slow down, the sources of wealth and consequently the types of property investors we see are likely to become even more diverse,” she says.

So who will the next generation of super-prime buyers who will be active over the next 10 – 15 years be?

UPTOWN BOYS

According to Oliver Williams from WealthInsight, while the number of millionaires in some of the more developed emerging markets (BRICs and MINTs) are growing rapidly – in Indonesia there are expected to be 22.6 per cent more millionaires by the end of 2014 – these are predominantly ‘lower-tier’ millionaires with a net wealth of between $1m – $4m. In Mexico, Indonesia and Russia, the ratio of males to females in this category is well above average. Attracted to the trendier parts of London by its nightlife and buzz, they won’t want to wait to buy till they are multi-millionaires. They will buy in outlying super-prime border areas like Kensington and Chelsea and Marylebone. Some of these millionaires won’t necessarily join the multi-millionaire club, but as the more successful accumulate wealth, the areas where they buy initially will either become super-prime, or existing super-prime will become super-super-prime.

DOWNTOWN GIRLS

At the same time, however, in some countries, a growing number of millionaire super-prime investors are women, increasingly those who have either entirely made their own fortune or who, like Wendy Applebaum, added to it through investments. Mama Ngina Kenyatta, a widow of Kenya’s first president, Mzee Jomo Kenyatta controls some of the largest privately-held land holdings in the country.

This is not just a developing world phenomenon. In the US, the number of wealthy women in the U.S. is growing twice as fast as the number of wealthy men. Almost half of American millionaires are women, and 48% of estates worth more than $5 million are controlled by women. At the moment, 60 percent of female millionaires have earned their own wealth: this percentage is expected to increase.

YOUNG AND GIFTED

Although there doesn’t appear to be any particular trend when it comes to age, new millionaires are likely to be young. This is especially so in Africa, says 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. This is particularly the case in fast-growing countries, such as Nigeria, where 63 percent of Ultra-High-Net-Worth-Individuals are entrepreneurs. In all emerging countries, though, wealth is an urban phenomenon; you rarely see evidence of it in rural areas or lesser cities.”

TROPHY SEEKERS

“You do get people buying super-prime property as a trophy asset,” observes McMahon. “Owning your own building in Mayfair or Belgravia is a draw for certain buyers, particularly those with significant architecture.” Prestigious apartments, such as those in One, Hyde Park, are another form of trophy investment. Owners of these properties tend not to live in them very often, but neither do they sell them. McMahon has observed that many Middle Eastern property owners tend to hold onto their buildings and to be more focused on preserving wealth for the next generation.

TRADERS

The Credit Suisse global wealth report pointed to 11 3G countries where superior growth is expected between now and 2060. These are Bangladesh, China, Egypt, India, Indonesia, Iraq, Mongolia, Nigeria, 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.

Definitions of growth blocs – and where the money is coming from

BRIC – the original Big Four – Brazil, Russia, India and China

BRICS – South Africa added in later

MINT – the next Big Four – Mexico, India, Nigeria and Turkey

CIVETS – Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa

 

NEXT ELEVEN

DEVELOPED

South Korea

NEWLY INDUSTRIALISED (NIE)

Indonesia

Iran

Mexico

Turkey

Philippines

DEVELOPING COUNTRIES

Egypt

Nigeria

Pakistan

Vietnam

Bangladesh

 

This article was published by Strutt and Parker

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