London, New York, Paris ‘top cities’ for ultra-rich

LONDON: The newly wealthy from the world’s fastest-growing emerging economies rate stability, business transparency and education systems as the most important factors in a global city, according to findings of The Wealth Report 2012 published by global real estate consultancy Knight Frank and Citi Private Bank.

Luxury housing prices in locations with this formula are evidence of their interest, said the report which highlights the increasing influence of global wealth flows on prime property and investment markets.

According to the report, London, followed by New York, Hong Kong and Paris are seen as the most important world cities for high-net worth individuals (HNWIs) while Beijing and Shanghai are the cities with the most rapid growth in importance to HNWIs.

HNWIs from the Middle East and Africa however rate Dubai as the location with the most rapid growth in importance while Latin American HNWIs rate Miami and Sao Paolo as strong contenders for future influence.

Monaco remains the most expensive residential location in the world with one sq metre there now worth US$58,300 (RM178,398) (in 4Q11) followed by prime locations in Cap Ferrat in Southeastern France, London and Hong Kong.

The report also found that prime property is a key part of investment portfolios — 2011 saw a global increase in allocation to real estate of 19%; the largest climbers in 2011.

A five-bedroomed property in London's high-end Kensington district. London, followed by New York, Hong Kong and Paris are seen as the most important world cities for high-net worth individuals.

Lifestyle and investment remain key drivers for luxury second-home purchases, evidenced by 16% of all HNWIs surveyed already owning a ski chalet while 40% own beachfront properties. The US and UK are the top second home destinations for the rich.

The report also confirms the relentless shift in wealth distribution towards Asia-Pacific — the region covering China, Southeast Asia and Japan now has more centa-millionaires (those with over US$100 million in assets) than North America or Western Europe.

Knight Frank and Citi Private Bank expect further growth in interest in commercial property from HNWIs this year, forecasting US$74.1 billion of private transactions globally in 2012 (a 5% y-o-y increase).

The Wealth Report editor Andrew Shirley said it is evident the world’s wealthy are weathering the economic slowdown better than the wider population as reflected in the prime property market.

“Those markets considered safe-haven locations continue to attract private investors looking for both prime residential and commercial property,” he said.

“Political and economic uncertainty across the world is only helping to exacerbate the trend.”

In Europe, despite the year’s continental recession, the main luxury market hotspots have remained relatively active with eight out of 10 top locations in the Knight Frank Prime International Residential Index (PIRI) price rankings in the UK, France or Switzerland.

Luigi Pigorini, CEO of Citi Private Bank Europe, Middle East and Africa, said wealthy individuals and families especially those originating from Europe, the Middle East, Africa and Asia have become extremely global in nature.

“Many seek the rule of law and stability that make the UK a top choice for investment,” he said. “With English a popular second language and a relatively weak pound, the global wealth have confidently focused their interest on London and the wealth preservation it can afford.”

He added that investors seeking a more conservative strategy have gravitated towards high-quality properties in central business districts in cities such as Beijing, London, Munich, New York, Paris and Sydney. Conversely, for those willing to accept more risk, high growth markets, such as in Asia and Latin America, may be able to generate more attractive returns relative to the US and Europe, said Pigorini.

Nevertheless, “Investors must remain cautious as global economic growth will continue to influence all property markets, and investors should measure their yield and return expectations taking growth into account,” he said.

The Wealth Report offers a global perspective and insight from property and investment experts at Knight Frank and City Private Bank. Results are taken from The Wealth Report Attitudes Survey that represents the thoughts of almost 5,000 HNWI clients of Citi Private Bank.

This article appeared on the Property page, The Edge Financial Daily, April 6, 2012.

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