Spreading the Wealth to All Corners of the Globe

Posted on Jan 31 2017 - 10:23am by Suzanne De Vita
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The world's wealthy have their pick of places to call home—and those places, according to a new report, run the gamut of the globe.

The Global Property Handbook, published by Barnes International, Warburg Realty and Wealth-X, ranks the "Alpha" housing markets that are drawing elite in search of luxury real estate, based on "emotional," "financial" and "practical" factors. Emotional factors include "cultural richness" and "luxury shopping;" financial factors include "competitiveness of property tax regime" and "ease of doing business;" practical factors include "access to leading universities" and "personal safety." The top 10 Alphas for ultra-high net worth individuals (a net worth of $30 million-plus), considering the factors, are:

  1. London
  2. New York
  3. Tokyo
  4. Sydney
  5. Paris
  6. Chicago/Osaka/San Francisco (Tie)
  7. Toronto/Washington, D.C. (Tie)
  8. Berlin/Hong Kong (Tie)
  9. Los Angeles
  10. Munich

London scored the highest on a 100-point scale, 77, for its combination of attractive emotional, financial and practical factors as they relate to buying luxury real estate. The capital of the UK, with a median "ultra-luxury property" price of $11.5 million, edged out New York, which scored 75, and Tokyo, which scored 70.

"The No. 1 ranking for London reflects its strength across the board, ranking in the top four places in more than half of the 11 indicators—cultural richness, luxury shopping, education, connectivity, financial safe haven, ease of doing business, and the number of ultra-wealthy individuals living in the city," the report states.

Though the world's wealthy invest all over, the U.S. is tops. Roughly half of the top 25 cities in the Handbook's ranking are in the U.S., underscoring its overall security and stability for real estate buyers. According to the Association of Foreign Investors in Real Estate (AFIRE), 95 percent of foreign real estate investors view U.S. real estate as sound.

Wealthy real estate buyers are moving into the luxury second home market, as well. The Handbook ranks Los Angeles No. 1 for ultra-high net worth individuals to buy a second home, followed by London, New York, Singapore and Hong Kong—all global financial centers.

The Handbook also ranks emerging markets for the wealthy—a list that includes Havana, Cuba, and Lisbon, Portugal. Lisbon, which was No. 1, was recently named the No. 2 place to invest in real estate abroad by Live and Invest Overseas, whether an ultra-high net worth individual or otherwise. Rounding out the top five emerging markets in the Handbook are Berlin, Taos, N.M., and Tel Aviv.

The Handbook, in addition, reports the Global Luxury Residential Property Index, which since 2010 has measured the top 10 percent of the residential property market by median sales price. The Index declined for the first time in its history in 2016—movement that indicates buying activity is not directly correlated to net worth.

"A combination of increased supply and weaker than expected demand contributed to a fall in prices in the first half of 2016," the report states. "As a result, only the properties with an optimal combination of practical, emotional, and financial benefits have continued to grow in value."

"As a share of total net worth, real estate holdings tend to fall as you increase your personal wealth," says Clelia Warburg Peters, president of Warburg Realty. "So someone with a net worth of $10 million might own a $5 million apartment, but if you have a net worth of $100 million, you're less likely to own $50 million worth of real estate."

Though the luxury real estate market as a whole is facing potential barriers to growth (Brexit, the Trump administration), ultra-high net worth individuals are spreading their wealth to all corners of the globe.

"Property wealth was not always so far-flung or mobile," the report states. "More than ever before, these homes of the wealthy will be spread far and wide, across different countries and continents."

Source: Wealth-X