The use of private equity in major property deals worth at least $10m (£6.1m) has nearly trebled since 2009.
According to Savills in association with Wealth-X, real estate now accounts for around a fifth of the invested wealth of the nearly 200,000 ultra high net worth individuals in the world.
The total value of the world’s real estate is now around $180trn, 72% of which is owner-occupied residential property. Of the $70trn that is “investable” and traded regularly, including $20trn of commercial property, more than half is bought by private individuals, companies and organisations. However, investing institutions, listed companies and publicly owned entities are becoming relatively less important to world real estate.
Around 3% – $5.3trn – of the world’s total real estate value is owned by UHNWIs. This wealthiest 0.003% of the world’s population has real estate holdings that are worth an average of $26.5m each.
Savills estimates that in 2012, around 35% of deals worth more than $10m, some 6,200 in total, were possible only because of private funding.
European and Asian UHNWIs hold by far the biggest share of all privately owned real estate, together accounting for almost 80% by value. European UHNWIs hold 31% of their wealth in real estate and Asians 27%, with a total value of around $4.2trn.
The majority (92%) of investments are within the “home” global region. North America stands out as particularly domestic, with US UHNWIs placing 99% of their real estate investments within their own country.
Meanwhile, mature and emerging nations have seen much more cross-border inward investment. Some 44% of UHNWI investors in Africa and 66% in Latin America are from outside the home region.
European real estate markets are the largest and most international, having attracted the most global inward investment, relative to size, with London the standout global destination for private inward real estate investment from virtually every corner of the globe.
Yolande Barnes, head of Savills world research, says: “In recent years there has been a tendency for UHNWIs to focus on ‘safe haven’, trophy properties for capital growth and wealth preservation. In future, we anticipate that some will begin to seek more productive, long-term income-producing positions. 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 are.”