According to the latest Knight Frank 2023 Wealth Report, the overall wealth held by UHNWI decreased in 2022 by 10%[i], even though the prime real estate prices jumped by 5.2%[ii].
Despite the surge of inflation and the geopolitical unrest that have deeply affected “traditional” investment portfolios, tangible assets such as real estate showed their resilience [iii] and how their low correlation to the equities and bonds helps preserve wealth.
2022 confirmed the post-covid trends: the surge of global mobility, the emergence of “digital nomads” or “hybrid working”, the importance of a better work-life balance, and the wish to retire early while having an enjoyable lifestyle. It has created a new demand and a new market as major cities around the globe change to match this new lifestyle. Many, such as Miami in Florida have set up tax incentives programs to put themselves at the forefront of this trend. Miami real estate grew by 21.6% in 2022, allowing the “Magic City” to rank in the Global Top 5.
If you consider:
a) The Economics - 2023 seems to be on track to be another impressive year of growth for prime real estate. The end of the lockdown’s measures in China has accelerated the expected recovery, and there are earlier-than-expected signs of a slowdown of inflation allowing a possible cut in the interest rates in 2023, all of this has led to the IMF revising its global growth forecast in January (0.2 higher than the October 2022 forecasts).
b) Or the trends in UHNW migration - global mobility, and the need for a second passportiv, especially from nationals of countries that implemented very strict anti-Covid policies- will fuel the demand for luxury accommodations in locations offering a full range of services and amenities.
c) And the new requirements for technology - the increases of energy and operational costs in 2022 are stressing out the importance of ESG themes in the real estate sector. In other words, the demand for prime properties, in well-connected locations, meeting ESG requirements is high, but the supply of such properties has still to catch up with this demand.
The Knight Frank view is that the return on prime property, in prime location, will continue to grow with Dubai, Miami, the Caribbean islands and Aspen ranked amongst the best performers.
Despite these high returns, cross-border investing in real estate is considered a challenge, with considerable language barriers, regulations, taxes and local knowledge discouraging most investors from maximising on this major opportunity. Estating has solved this problem and removed the barriers. Estating provides expertise and fintech enabling investors and wealth managers to access the power of international property easily, flexibly, and efficiently through investment directly from investors’ banking account. A superior form of real estate investing without the hassle.
[i] 10% are equivalent to slightly more than USD 10 trillion.
[ii] PIRI 1’’ Prime International Residential Index across 100 keycities, sun, and ski locations. The increase is even more significant in the sunny (+8.4%) and ski (+8.3%) locations.
[iii] Particularly super-prime (USD 10M+) and ultra-prime (USD 25M+) real estate.
[iv] 13% of UHNWI are planning to apply for a second passport (Wealth Report 2023, Knight Frank).