A Passion Investing Renaissance: New UHNWI Buying Trends in Real Estate

Posted 2015-09-29 in /stories

Land ownership has often been cited as the most ancient expression of wealth. Throughout human history, it has incited strong emotion -- joy, envy and admiration. And now, some new trends are evolving, due to the relationship between land and the exponentially growing UHNWI (Ultra High Net Worth Individual) wealth ($30M and up).

Passion Investing has been around for a while; it just means that the UHNWI investor buys a property for other reasons than immediate ROI. A trophy asset is often a passion investment. And this trend, due to the brightening of the economy and the growing number of UHNWIs, is in a formative renaissance.

This idea was explicated well in the Knight Frank Wealth Report, 2015. It was said that over a quarter of UHNWIs are considering purchasing another property to add to the three they already own. The demand from Asian UHNWIs for vineyards remains important, with 40% of respondents with clients in China, 43% in Taiwan and 31% in Malaysia noting rising interest. In Africa (29%) and the Middle East (40% in the UAE) equestrian properties are more of a draw, while a ski chalet is the top priority for wealthy UHNWIs from Europe (35%) and North America (50% in the US).

 In addition to the vineyards and horse properties, there is another growing trend, as it has been noted that passion investing is taking the form of buying private islands. Bermuda has claimed the number one spot in a new list of the world’s top 20 islands for UNHWI real estate investment.

 It is generally thought, and the current research suggests that the purchase of a private island is the ultimate trophy asset. Often, UHNW buyers are seeking an ultimate hideaway and a chance to shape their own world. For them, the concepts of remote and private are priceless. With the price of a typical four-bedroom property in Bermuda now exceeding $4 million, this island has the highest concentration of UNHWI property holdings of any island outside the US. Other notable mentions among Caribbean islands are The Bahamas, British Virgin Islands and Antigua.

 Whether it is islands, vineyards, equestrian properties, or basic fourth and fifth trophy homes, passion investments occasionally have a downside also, as they come with the potential for greater risk than a standard portfolio investment. Thus, when the economy fails, the popularity of passion investments fades also.

But what is evident now though, again according to Knight Frank, is the world’s ultra rich are spending significantly on investments of passion. The total value of passion investments held by UHNW individuals stands at US$1.1 trillion – consisting of US$370 billion in North America, US$330 billion in Europe, US$240 billion in Asia and US$160 billion between Latin America, the MENA region and Oceania.

 So was John Keats correct, when he said, “ A Thing Of Beauty Is a Joy Forever”? Probably, as in the eye of the passion investor, who is also the passionate investor, a property must have more meaning than just dirt or bricks and mortar on that dirt. The land has to speak, has to have a soul. To UHNWI passionate real estate investors, they hear and see the voice and soul, so often hidden from others.

 

By Susan Kime for JamesEdition