Each year in March, Knight Frank publishes something called, The Wealth Report, which typically includes things like its Prime International Residential Index (PIRI) and a general overview of what ultra high-net-worth individuals (UHNWIs) are up to with their money.
(An UHNWI is typically defined as someone with a net worth greater than $30 million. And as of last year, there were nearly 400,000 of them around the world, with Hong Kong being the city with the most.)
In anticipation of this year's report, Knight Frank has just published the key findings of an "Attitudes Survey." This is them talking with and surveying private bankers, wealth advisors and family offices about some of the key themes for 2023.
Here are a few of my takeaways:
Globally, about 1/3 of UHNWI wealth is allocated to primary and secondary homes. This is expected. Generally the richer you become, the more your net worth gets diversified away from your primary residence. It is also worth noting that of this 1/3 allocation, more than a quarter is being held outside of their country of residence. This outside-of-country-of-residence percentage is highest for UHNWIs in the Middle East (41%).
Each year in March, Knight Frank publishes something called, The Wealth Report, which typically includes things like its Prime International Residential Index (PIRI) and a general overview of what ultra high-net-worth individuals (UHNWIs) are up to with their money.
(An UHNWI is typically defined as someone with a net worth greater than $30 million. And as of last year, there were nearly 400,000 of them around the world, with Hong Kong being the city with the most.)
In anticipation of this year's report, Knight Frank has just published the key findings of an "Attitudes Survey." This is them talking with and surveying private bankers, wealth advisors and family offices about some of the key themes for 2023.
Here are a few of my takeaways:
Globally, about 1/3 of UHNWI wealth is allocated to primary and secondary homes. This is expected. Generally the richer you become, the more your net worth gets diversified away from your primary residence. It is also worth noting that of this 1/3 allocation, more than a quarter is being held outside of their country of residence. This outside-of-country-of-residence percentage is highest for UHNWIs in the Middle East (41%).
The average UHNWI owns 4.2 homes around the world, with UHNWIs in Asia owning the most: an average of five homes. This is the kind of stat that might provide motivation for a foreign buyer ban, but I continue to believe that there are other bigger drivers impacting housing affordability/supply across our global cities.
About 15% of UHNWIs said that they want to purchase a residential property this year (2023). This is down from 21% last year. Inline with bullet point number one, the greatest appetite/stated intent is coming from the Middle East. (Related article: The new Gulf sovereign wealth fund boom)
Real estate was identified as the top investment opportunity. About 1/3 of UHNWIs want to invest in real estate -- either directly or indirectly -- in 2023. And the top asset classes are: healthcare, logistics/industrial, office, multi-family rental apartments, and hotels. It is interesting to see office in the top three. A positive sign that it is maybe being viewed as an oversold opportunity.
Finally, environmental sustainability is being increasingly considered by UHNWIs when it comes to investment properties: 57% are considering energy source(s), 33% are considering opportunities for refurbishment, and 30% are considering the materials used/the embodied carbon footprint inherent to the asset.
Knight Frank just released the 16th edition of its Wealth Report along with the disclaimer that, with everything going on in Ukraine right now, this outlook is of "little relative importance" and kind of doesn't matter in the grand scheme of things. In any event, it includes the latest edition of their Prime International Residential Index (PIRI 100), which looks at the annual % change in luxury residential prices around the world. The chart is interactive, but I screenshotted (above) the top risers and fallers. Toronto is 4th in the Americas and 7th globally with a 20.3% year-over-year increase. Miami is also no surprise and came in 4th globally. The top three cities were Dubai, Moscow, and San Diego. Thankfully though, the number two city is in serious jeopardy right now and I suspect that its position will look quite different next year. Money will go where it feels safe and secure.
The average UHNWI owns 4.2 homes around the world, with UHNWIs in Asia owning the most: an average of five homes. This is the kind of stat that might provide motivation for a foreign buyer ban, but I continue to believe that there are other bigger drivers impacting housing affordability/supply across our global cities.
About 15% of UHNWIs said that they want to purchase a residential property this year (2023). This is down from 21% last year. Inline with bullet point number one, the greatest appetite/stated intent is coming from the Middle East. (Related article: The new Gulf sovereign wealth fund boom)
Real estate was identified as the top investment opportunity. About 1/3 of UHNWIs want to invest in real estate -- either directly or indirectly -- in 2023. And the top asset classes are: healthcare, logistics/industrial, office, multi-family rental apartments, and hotels. It is interesting to see office in the top three. A positive sign that it is maybe being viewed as an oversold opportunity.
Finally, environmental sustainability is being increasingly considered by UHNWIs when it comes to investment properties: 57% are considering energy source(s), 33% are considering opportunities for refurbishment, and 30% are considering the materials used/the embodied carbon footprint inherent to the asset.
Knight Frank just released the 16th edition of its Wealth Report along with the disclaimer that, with everything going on in Ukraine right now, this outlook is of "little relative importance" and kind of doesn't matter in the grand scheme of things. In any event, it includes the latest edition of their Prime International Residential Index (PIRI 100), which looks at the annual % change in luxury residential prices around the world. The chart is interactive, but I screenshotted (above) the top risers and fallers. Toronto is 4th in the Americas and 7th globally with a 20.3% year-over-year increase. Miami is also no surprise and came in 4th globally. The top three cities were Dubai, Moscow, and San Diego. Thankfully though, the number two city is in serious jeopardy right now and I suspect that its position will look quite different next year. Money will go where it feels safe and secure.
London has a breed of specialist developers that are known as rooftop or airspace developers. What these developers do is build on top of existing and occupied buildings -- mostly residential. Firm examples include Upspace and Apex Airspace. According to this recent WSJ article, the city is also making moves to relax regulations so that more of these top-ups can be completed.
Brokerage Knight Frank estimates that in central London alone there are probably 23,000 buildings that could support a few extra floors, resulting in upwards of 41,000 new homes. I have done early feasibility studies for similar projects here in Toronto and they're not simple to execute. But building structures are typically constructed with a factor of safety and so, in some/most cases, you can build a little on top without doing any additional reinforcing. (Note: I am not a structural engineer.)
In any case, the benefits of airspace projects are obvious. You're creating additional supply in a tight housing market like London. Similar to Toronto's laneway housing program, it's not going to completely solve the larger problem of affordable housing. But every bit of new housing helps, regardless of where it lands on the spectrum of affordability.
One of the drawbacks, which is the headline of the above WSJ article, is that penthouse residents are getting demoted in the process. They're going from penthouse to sub, or sub-sub, or sub-sub-sub penthouse. They also need to endure a bit of construction right above them. Cry me a river?
But what is also important to point out is that there are lots of buildings out there which are facing capital expenditure shortfalls. They have maintenance and repair demands that simply aren't adequately funded. Adding additional floors can be a way for these buildings to generate that cash and, in some cases, residents are even partnering with airspace developers to share in some of the profit upside.
Not surprisingly, these sorts of arrangements are seemingly being met with a fair bit of support. Because in these instances, your options are basically as follows: Either you cut a repairs and maintenance check right now or you support a bit of development and then hopefully you'll be the one receiving a check in the future. I suspect we'll be seeing a lot more of this, not just in London, but in cities all around the world.
London has a breed of specialist developers that are known as rooftop or airspace developers. What these developers do is build on top of existing and occupied buildings -- mostly residential. Firm examples include Upspace and Apex Airspace. According to this recent WSJ article, the city is also making moves to relax regulations so that more of these top-ups can be completed.
Brokerage Knight Frank estimates that in central London alone there are probably 23,000 buildings that could support a few extra floors, resulting in upwards of 41,000 new homes. I have done early feasibility studies for similar projects here in Toronto and they're not simple to execute. But building structures are typically constructed with a factor of safety and so, in some/most cases, you can build a little on top without doing any additional reinforcing. (Note: I am not a structural engineer.)
In any case, the benefits of airspace projects are obvious. You're creating additional supply in a tight housing market like London. Similar to Toronto's laneway housing program, it's not going to completely solve the larger problem of affordable housing. But every bit of new housing helps, regardless of where it lands on the spectrum of affordability.
One of the drawbacks, which is the headline of the above WSJ article, is that penthouse residents are getting demoted in the process. They're going from penthouse to sub, or sub-sub, or sub-sub-sub penthouse. They also need to endure a bit of construction right above them. Cry me a river?
But what is also important to point out is that there are lots of buildings out there which are facing capital expenditure shortfalls. They have maintenance and repair demands that simply aren't adequately funded. Adding additional floors can be a way for these buildings to generate that cash and, in some cases, residents are even partnering with airspace developers to share in some of the profit upside.
Not surprisingly, these sorts of arrangements are seemingly being met with a fair bit of support. Because in these instances, your options are basically as follows: Either you cut a repairs and maintenance check right now or you support a bit of development and then hopefully you'll be the one receiving a check in the future. I suspect we'll be seeing a lot more of this, not just in London, but in cities all around the world.
