It is often said that the rich will always get richer. Given that a large part of most High Net Worth individuals’ wealth is usually made up of property in some form or another, we thought we would take a look at the latest Wealth Report from Knight Frank for 2010 and see what the super rich were up to this year, and how they envisage property as investment for the year ahead.
The survey defines High Net Worth individuals as having assets in access of 10 million USD. Of those taking part, on average property made up a third of total asset structure and only 8% had no property in their portfolio at all.
These figures are no great surprise, given the fact that property is often acquired in the general course of investment by the super wealthy anyway. Many companies and corporations will inevitably own their own premises, and if privately held, this will of course contribute to the holdings in the sector.
With the asset sector analysed further, of the property held, over 90% was made up of residential and commercial property, the remaining 10% being split with 5% on Forestry and Agricultural, and 5% in property funds and Real Estate Investment Trusts.
The low level of investment into REITs and Funds could be down to a number of things. Both are relatively new concepts (by comparison to straight forward property purchasing), and both more associated to the equities sector rather than actual property given the nature of them as an investment tool, thus leading to more suggestible volatility and subsequent avoidance.
When asked their opinion about the outlook, 70% suggested property was a good investment for 2010, with stocks and shares coming a close second at 68%. Concerning the property sector itself, more than half suggested that residential property would be the best bet of the options and sectors available.
The survey in general correlates very well with our own High Net Worth clients here at IPIN, which like most have found the past year to be a tough one to balance, although those that have, property has been the main keystone in achieving stability.
One has to bear in mind though before rushing off to restructure the portfolio, that the general objective of those surveyed is said to be long term capital appreciation. This mindset goes a long way to explaining the lack of involvement in funds and REITs of course, but as the market does pick up, expect a change in holdings in the form of an increase in the more liquid side of investments such as property funds, REITSs and derivatives.
For the everyday property investor though, where having a third of ones wealth in real estate and 10 million USD floating about isn’t a reality, the long term property investment is perhaps not as practical. Investing into property is still recommended, just through more affordable products.
Subscribe to IPIN live by Email - Have IPIN Live updates delivered directly to your e-mail.
- Tuesday 23 March 2010