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November 26, 2013

Global Buyer Trends: The 'Safe-Haven' Investments Driving Luxury Real Estate

By Neharika Padala

Knightsbridge penthouseAs affluent buyers around the world search for safe-haven investments, prices in several property markets continue to rise.

Edward de Mallet Morgan, Associate Partner at Knight Frank, talks to Elite Traveler about the trends in the global luxury real estate market and tells us where his clients are looking to invest.

With a growing number of affluent individuals around the world, several real estate markets around the globe are seeing a rise in the demand, and prices of, luxury residential properties.

But while some markets are facing the impact of tax increases and restrictions – who could forget French president Francois Hollande’s property tax on foreign-owned second homes in July, which caused many potential buyers to rethink their chosen location – others are sucking up their ‘safe-haven’ statuses, including London, New York and newcomer Miami.

In its Wealth Report 2013, leading real estate consultancy Knight Frank found that confidence in owning real estate is rising in key global cities around the world, with relatively risk-free investments pushing up prices.

The company’s Wealth Report Attitudes Survey, compiled by asking the views of 400 private bankers and wealth advisors around the world to give an insight into their HNWI clients’ attitudes, revealed that residential property investment rose in popularity among 43% of HNWIs in 2012, with properties in the city leading the way.

gramercy park main462“For those looking to invest at the top end of the market, they are also looking to minimize risk, so they are looking at established and in some cases niche areas of the market, where they know markets have remained strong,” says Edward de Mallet Morgan, Associate Partner at Knight Frank.

“Those locations where properties are owned by people who do not need to sell or will not be under pressure to sell when the markets are difficult are the markets that remain resilient, to a degree.

“When you look back at the statistics and see how values have changed over the last few years, very often they haven’t, and that’s purely because vendors haven’t been willing to transact at levels that they perceive to be below market value, or their own value.”

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de Mallet Morgan says that top-end residential property in London is the best example of these safe-haven investments. “As long as you’re being sensible with what you’re buying, where you’re buying and how much you’re paying for it, it’s going to be a very good medium to long-term investment,” he adds.

Knight Frank’s Wealth Report 2013 also reported that prime sales volumes in New York, which is not traditionally an investment market, hit their highest level for 25 years in the final quarter of 2012.

“There have been areas of regeneration and redevelopment, and some of the new projects – particularly the really central properties in and around the park – have sold very, very well. There has been huge investment from all over the world,” says de Mallet Morgan.

The lifestyle element of property investment

Lifestyle has emerged as an important factor when buying a property, with global cities and their major markets acting as a ‘magnet’ for the affluent, according to Laurie Moore-Moore, founder and CEO of The Institute for Luxury Home Marketing.

Identifying London, New York, Hong Kong and Paris as important cities for the über-successful, Moore-Moore says that the political and economic security, high inventory of high-end residences, personal safety and population of wealthy peers in these locations is attractive.

“Add a desirable lifestyle and excellent educational opportunities for the children and you have a city that the wealthy will gravitate to,” she adds. “Affluent Asians are especially drawn to cities offering the education component.”

Another city becoming increasingly popular with high-net-worth buyers is Miami, which is now enjoying a strong real estate market, despite being at the forefront of the housing crash four years ago.

The American city was one of ten important global cities included in Christie’s International Real Estate’s report, ‘Luxury Defined: An Insight into the Luxury Residential Property Market’, which stated that the strong luxury property market in Miami had been fueled by interest from South American buyers, with “a high percentage of both international and secondary and additional home buyers”.

“Miami is definitely an up and coming destination,” says de Mallet Morgan. “It is being seen very much so as a financial crossing point for Southern America.”

monaco luxury homeOther locations that are proving popular with affluent buyers due to their convenience and lifestyle include Monaco, which de Mallet Morgan says has seen more sales transactions following the property tax changes in France.

“You’ve got the Côte d’Azur at your feet, you’ve got the Monaco Grand Prix, you’ve got the Monaco Masters Tennis, and the Alps are within just under an hour by helicopter,” he says.

“If you feel inclined to you can get your helicopter straight from Monaco down to Nice and you can be very quickly back in London or Paris, or wherever you need to be.”

Dubai is also a central location for businesses “in terms of the various different time zones”, de Mallet Morgan adds. “It is very cosmopolitan in Dubai and also a lot of people like the fact that the climate is good all year round. Depending on where you are, you can potentially have that seaside holiday-type lifestyle element attached to it as well.”

Knight Frank’s Wealth Report 2013 found that the prices of luxury villas in the emirate increased by 20% in 2012. Dubai also ranked in the top 10 cities that are most important in the consultancy’s Wealth Report Attitudes.

Also topping the list of important locations in Knight Frank’s global cities survey were Tokyo, Singapore and Hong Kong. Driven by the increase of wealthy buyers in the Asia Pacific, the consultancy firm additionally reported that Indonesia, Jakarta and Bali were in the top 10 growth markets in 2012.

Recovering and emerging markets

While local real estate markets in France, Italy, Spain and Portugal among the ‘less strong’, de Mallet Morgan says that confidence is starting to increase in these locations, particularly in the South of France, which has experienced late activity.

“There have been some big deals in Majorca, for example, over the course of this summer and, likewise, some big properties have transacted in Florence in the top end of the market,” he adds.

Ibiza luxury homeAnother location that is also on the rise is Ibiza, which is being recognized for its beautiful countryside and beaches, rather than for being a party destination, and is gaining popularity with European buyers.

“There has been a lot more top-end, super-rich interest in Ibiza than there has been for some time,” says de Mallet Morgan.

“One of my colleagues on the island commented that they’d never seen so many super yachts off the coast of Ibiza ever, having been there for 15-20 years.

“In response to that, the quality of the property is increasing, and larger, better furnished, better equipped properties are being built to cater for that marketplace.”

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