Millionaires who want to buy a house are ready to as the housing market grows across the world this year.
The real estate sector is actively developing and this is supported by further investments by people with net assets of more than $50,000,000 in the coming months. 26% of these billionaires intend to invest in the 2021 housing market.
Content:
- Investments by the rich
- Important aspects for millionaires who want to buy a house
- Millionaire trends
- More forecasts
- Where this interest comes from
- New areas in Spain where the rich want to buy homes
- The market outside of Spain
- Self-isolation and millionaires' priorities when choosing a home
- Medium-sized cities
Investments by the rich
Investments by the rich will be marked by sustainability criteria as 45% of them are interested in ESG (environmental, social, and corporate governance). This is one of the main conclusions of the Wealth Report study by the British consulting company, Knight Frank. The report reviews the trends in the real estate sector in 2020 as affected by COVID-19. According to the report, Asia constitutes one of the wealthier global sectors; 36% of the world's billionaires with a growth forecast of more than $50,000,000 in net assets are located here.
Important aspects for millionaires who want to buy a house
Another important aspect is the amount of private capital invested in 2020 and its distribution among various real estate sectors. For example, $88,900,000,000 was invested in housing compared to $124,300,000,000 invested in offices in 2019. $59,200,000,000 versus $89,600,000,000 a year earlier accounted for production and logistics properties. There is $27,700,000,000 in the retail trade, lower than the previous year’s $43,500,000,000. Hotels accounted for $13,000,000,000, half as much as $29,500,000,000 in the previous year.
Taking this into account, the residential sector showed the best investment results in 2020. Moreover, its best aspects increased by 1.9%.
"Low mortgage interest rates, historically low in some markets, the search for space, privacy after restrictions, and changes in mobility models have helped price growth. Thus, we see a new maximum this year," said Liam Bailey, Global Director of Research at Knight Frank.
Millionaire trends
The trend of millionaires wanting to buy homes will continue in 2021 as 26% of them plan for this annually. This global trend corresponds to factors in the Spanish market where sales of new luxury buildings continue. Even taking into account the isolation, lockdowns, and the most difficult months of the pandemic, there was great stability in both prices and demand. Furthermore, this is currently recovering to pre-COVID-19 levels. In addition, preferences have changed as people seek private houses on the outskirts of Madrid with open spaces, like a terrace or garden, and beautiful views.
According to Carlos Zamora, a partner at the consulting company, this trend is expected to continue for some time. He adds that "soon we will see again how Madrid and the city center are restoring their demand and attractiveness, including for international investors, whose interest in Spain and, in particular, in the capital continues to strengthen."
More forecasts
According to Knight Frank forecasts, luxury housing prices in Madrid will grow by 3% in 2021. It became the most famous Spanish city ahead of Barcelona by 2 %. However, Seoul will have the most global growth at 7%. This is followed by both Shanghai and Cape Town at 5%.
Despite already being present in the real estate sector, the rental market is an interesting investment industry. It was identified by 32% of respondents and with the pandemic, its purchasing power decreased especially among the youngest. This is followed by logistics at 28%, land for construction at 24%, and offices at 18%.
"We are facing a housing sector that is steadily growing, far from during the financial bubble of 2008. Despite the current crisis, the positive trend towards recovery after the great crisis continues, " Zamora said.
Where this interest comes from
This year’s interest in buying houses by millionaires is due to a significant increase in investment in the real estate market. This trend continues to increase after the pandemic and restrictions. People are looking for open spaces or dream of renovating their homes because they no longer want to continue living in the same conditions.
Renovation also interests many wealthy people who have the opportunity to buy a house and renovate it into multiple residences or accommodations. These can then be rented out or even opened to relatives for holidays or leisure use. In addition, the need for houses on the outskirts of large cities has significantly increased as more people seek peaceful lives without the noise of transport or social chaos that comes from living in a city.
Millionaires devote most of their lives to work in a variety of companies or fields of activity. Due to the desire to invest in real estate, the number of transactions in this sector has also increased.
New areas in Spain where the rich want to buy homes
The business of Spanish luxury housing continues to actively develop. The peak of the national real estate market had more than 8% growth in Madrid or Catalonia – showing that luxury home purchases are keeping up with the times. According to a recent study published by the company LuxuryEstate, the average price of this type of property is now 4.200,000 euro.
"The housing market in Spain is experiencing a significant recovery again, which is even more noticeable in the luxury sector," says the real estate company upon estimating average figures.
According to the report, Spain continues to be a very attractive market not only for local investors buying luxurious houses but also for rich international buyers. The most active purchasers are the French, Germans, Italians, and Americans who continue to buy properties as their first or second place of residence.
"Analyzing the development of this sector in the country, we find regions where the search for luxury homes has increased in recent months," says LuxuryEstate. For example, La Coruna, El Puerto de Santa Maria (Cadiz), Alcobendas (Madrid), Manilva (Malaga), and Adeje (Tenerife) are among the areas that have attracted the greatest interest of investors in recent months. Of course, not all areas are equally attractive and according to the company, some have a waning interest. For example, areas that traditionally receive investment such as Playa de Haro (Girona), Maspalomas (Gran Canaria), or Benalmadena Costa (Malaga), "experienced the opposite effect".
However, the most popular are villas and apartments, followed by single-family homes and hotels.
The market outside of Spain
The LuxuryEstate report also analyzes the appetites of Spanish investors outside of Spain. According to statistics, large national fortunes are mainly associated with the United States, the United Arab Emirates, the United Kingdom, and Brazil as main investment areas. On the other hand, coastal areas and 2 major cities remain the most popular with international buyers in the country: Marbella, Ibiza, Madrid, Barcelona, and Palma de Mallorca, in that order.
"In 2018, we saw that July and September were the most successful for our market worldwide. 2019 started very well and in January, there were even better results than in September last year, " concludes Silvio Pagliani, founder of LuxuryEstate.
Self-isolation and millionaires' priorities when choosing a home
The coronavirus pandemic has forced millions of people around the world to temporarily lock themselves in their homes over the past year. The super-rich were no exception although having a million-dollar fortune helped them live most conveniently. If this was not possible, then they bought a convenient home. What characteristics are the richest people on the planet looking for in their homes?
"There was a greater interest in real estate properties that have open spaces and are located away from major urban centers," answers the Barnes Global Property Handbook, a yearbook in which the Barnes agency explores the luxury real estate market.
Based on customer selection dates and other criteria in the sector, the analysis focuses on Ultra High-Net-Worth individuals. The abbreviation UHNWI is used to denote those who have a fortune of more than $30,000,000. According to the yearbook, in 2020, they also experienced the ups and downs of the crisis although they quickly recovered. If at the end of 2019 there were just over 290,000 super-rich people in the world, in the early stages of the pandemic, this figure fell to 238,000. In September however, this was already back to about 280,000.
The reason for this fluctuation is the turmoil experienced by the world markets since a significant amount of the 27 trillion euro is invested in stock exchanges and other types of liquid assets. Only 6.1% of all the assets of the richest (about 1.8 trillion euro) was luxury real estate.
At the same time however, when individuals noticed their situations returning to normal, they experienced the same mentality change as many other citizens. "This is a trend that we are now seeing all over the world; they are looking for a safe investment but also a safe place to live with their family," explained Thibaut de Saint Vincent, Global President of the Barnes Group. In fact, according to a survey conducted in November 2020 of 1,850 Barnes clients, 9/10 said that they expect to spend more time in a second home in the future. Furthermore, 72% agreed with the idea of having semi-basic housing or a house usually considered a place of leisure but where you can spend more time and also work from.
Medium-sized cities
TThe best cities have also changed for the rankings of the super-rich. If traditionally they roughly coincided with the places of residence of the majority of billionaires (New York, Hong Kong, Tokyo, Los Angeles, Paris, and London), in 2020, this was replaced by cities with a higher quality of life. The classification is based on financial, practical (schools, transport, etc.), and social (culture, restaurants, etc.) criteria that represent an absolute triumph in 2020 for average European cities.
Zurich (Switzerland) has come from 30th place in 2019 to 1st. The capitals of Denmark, Copenhagen and Sweden, Stockholm also rose from 35 and 22 to 2nd and 5th positions respectively. Tokyo remains 3rd while Miami in the United States makes its way to 4th place from 27th in 2019.
Madrid however, has fallen from 10th place achieved in the previous year to 16th, and Barcelona was again not included in the ranking of the 50 best cities on the planet for the super-rich. Both of these cities are highly dependent on foreign buyers in the luxury segment. "We are in a difficult situation but we are very confident in this market and the recovery of real estate in the coming months when the international situation and vaccinations will normalize," said Eduardo Crisenti, Managing Partner of Barnes Madrid.
For this expected restoration, both cities received an important award from the luxury real estate agency. The yearbook usually highlights a number of places as interesting sources for investment and in 2021, the 2 Spanish megacities have good positions. Madrid ranks 6th (after Paris, Geneva, London, New York, and Quebec) with the prospects of cheaper apartments in this market ranging from 1% to 5% depending on the area. Barcelona ranks 7th and its forecast in the study is stable although "negotiations are possible because owners will have to sell in order to restore some liquidity," explained Emmanuel Virgulay, Partner of Barnes Barcelona.
Despite its high-quality housing, Spain's prices are differentiated from the global market, giving the country a competitive advantage. The Salamanca district in Madrid has the highest average amount at 6675 euro per square meter. This is followed by La Zagaleta (an urban area on the outskirts of Marbella) at 6638 euro per square meter and the Touro Park district in Barcelona at 6000 euro per square meter. These are expensive places for the majority of the population but they are still cheaper than some world capitals. In Hong Kong, as the report emphasizes, the average transaction (including all residential properties and not just luxury goods) exceeds $1,200,000. Munich ranks 2nd with an average expenditure of $1,000,000 per house and the city-state of Singapore ranks 3rd at $915,000.
With moves out of the city, the yearbook also points to the ocean and the mountains where rich people are more actively looking for housing. The interest of buyers is noticeable on the coast of the French Basque Country, the Cote d'Azur and the island of San Bartolome in the Caribbean Sea. These are among the top 5. Completing this classification is the Hamptons, a classic luxury vacation destination on the east coast of the United States and Forte dei Marni in Tuscany (Italy). The resorts of the Swiss and French Alps, as well as Whistler Blackcomb (Canada), Niseko (Japan), and Jackson Hole (USA) are popular with mountain lovers.