Super Rich's appetite for property remains unshaken

KUALA LUMPUR: Luxury house prices have fallen around the globe, but the super rich's appetite for property remains unshaken, according to the Knight Frank/Citi Private Bank Wealth Report 2009.

Knight Frank London's head of residential research Liam Bailey said despite the global house prices falls, the rich are committed to property as an asset class.

“The results of our Attitudes Survey, which represents the views of a cross section of Citi Private Bank’s wealthiest clients, reveals that 55% of them plan to increase their exposure to residential property over the next two years,” he said.

Bailey added the wealthy want their investments to be both tangible and transparent amidst the turbulent times.

The Wealth report analyses prime residential property markets and the behaviour and attitudes of the wealthy.

It covered the property market in the UK, Europe, the Caribbean, Asia, Australia and Africa.

It is produced by Knight Frank in collaboration with Citi Private Bank and includes the 2008 Knight Frank Prime International Residential Index, Knight Frank/Citi Private Bank High Net Worth Individuals (HNWI) Attitudes Survey, Knight Frank World Cities Survey and Knight Frank Global Farmland Survey.

The report also showed a majority of HNWIs appeared to be sitting on the fence at the moment when looking at bricks and mortar as an investment class.

It added 57.1% of them were not making changes to their property portfolios, although over 90% have seen their property portfolios decrease in value during the credit crunch, with about a third of those hit by a substantial decrease.

According to the survey, property accounts on average for 30% of the HNWI's asset portfolios.
Although a number of investors admitted they might have to sell some property, it appeared that HNWIs still regarded property as a crucial part of their investment portfolios and have more confidence in it than other more ephemeral investments.

Some of the world’s richest people had cut down discretionary spending, with some of the most desirable prime residential property markets in the world inevitably affected by the global downturn.

According to the report, experienced investors realise they are firmly into the bargain-hunting stage of the property cycle, especially in the commercial and newbuild sectors with some HNWIs actively looking to take advantage of distressed sales to cheaply acquire stable assets with good yields.

However, there are those who seemed to be awaiting the bottom of the market but they risk missing out on the best opportunities, which could have been snapped up by those prepared to take more risks, it said.

Bailey said: “Although almost half the locations surveyed in Knight Frank’s Prime International Residential Index (PIRI) managed to show a positive overall return in 2008, price growth had either stalled or started to decline in nearly 75% of these locations by the end of last year."

Hong Kong saw the sharpest annual drop of 24.5%, Dubai, which recorded annual overall growth of almost 11%, and later saw prices fall by 19% in the last quarter of 2008. Prime properties in Monaco are the most expensive in the world, costing an average of €55,000 psm for its best properties, followed by London and Manhattan.