According to a new report by Wealth-X and the Sotheby's International Realty, nearly US$3 trillion of the world's private wealth is held in owner-occupied residential properties, a value greater than the GDP of India.
There are 211,275 ultra-high net worth (UHNW) individuals - defined as those with US$30 million and above in net assets - in the world and 79% of them own two or more residences.
Some of the main hubs for luxury residential real estate are New York City, London and Hong Kong, but niche locations - such as Lugano, the Hamptons outside New York City, and rural areas around the world - are gaining in popularity.
The Wealth-X and Sotheby's International Realty Global Luxury Residential Real Estate Report forecasts that the ongoing shift in the wealth creation cycle from the West to the East, and the growing significance of intergenerational wealth transfers will have significant consequences on the luxury residential real estate market - with a noted emphasis on new developments and a change in investment grade cities.
Below are other key findings from the inaugural report:
- The value of UHNW-owned residential real estate assets increased by 8% globally in 2014.
- On average, UHNW individuals own 2.7 owner-occupied residences.
- As of 2014, over 7% of the world's UHNW population made their wealth through real estate, up from 5% in 2013.
- Ultra affluent women value real estate assets more than their male counterparts, holding 16% of the net worth in such assets, on average, compared to less than 10% for men.
- Luxury residential real estate is an asset class typically favored by UHNW individuals with inherited wealth: these individuals hold 17% of their net worth in such assets, compared to just under 9% for self-made UHNW individuals.
- UHNW individuals with net worth between US$30 million and US$50 million typically keep their primary residences for over 15 years and their secondary residences for over 10 years.
- Billionaires change one of their four properties, on average, once every three years.
- Secondary residences are typically 45% more valuable than primary residences; twice the square footage and have 10 acres of land.
- At 83%, Monaco has the highest density of foreign-owned UHNW residences.
- Over 6% of the world's UHNW population have relocated their primary residence to a different country from which they were born - these individuals often keep a secondary residence in their home countries, and India is the leading country in this respect.
The Wealth-X and Sotheby's International Realty Global Luxury Residential Real Estate Report 2015, which looks at trends in the UHNW population's appetite for luxury residential real estate across the world, identifies specific attitudes, behaviors and locations that matter to this industry and this wealth segment.