How the Rich Buy Real Estate
NEW YORK ( MainStreet) European, Asian and Middle Eastern ultra high net worth individuals hold the biggest share of all privately owned real estate at 31%, 27% and 26% respectively, according to new data.
Savills's "Around The World In Dollars And Cents" study found that North America stands out as uniquely domestic with 99% of all wealthy investment coming from U.S. citizens themselves.
"Global real estate is mostly residential and held by occupiers but private owners are becoming more important in the world of traded investable property," said Yolande Barnes, head of world research at Savills.
The world's richest hold a fifth of their wealth, or $5.3 trillion, in real estate assets, and the use of private equity in property deals worth at least $10 million has tripled since 2009.
"In the world's leading cities, the willingness of private wealth to take the place of debt finance or to take a higher-risk development position is now making the difference between deals done or schemes mothballed," said Barnes.
The corporate entity ownerships of choice for many wealthy individuals in the U.S. are LLC, LLP and sub chapter S corporations.
"The rationale can be driven by privacy, liability protection, ease of gifting or the fact that there are multiple investors within the acquiring entity," said Lawrence Gore, president of the New York metro region with Wilmington Trust. "Oftentimes, family trusts are investors within the purchasing entity."
While the total value of the world's real estate is currently an estimated $180 trillion, about 72% is owner occupied residential property. Of $70 trillion that is investable and traded regularly, more than half is purchased by private individuals, companies and organizations.
"Since the 2008 debt crisis, sovereign wealth funds, wealth management companies, private banks and family offices have stepped into the property deals that corporate bankers have deserted," said Barnes.
For investors seeking privacy, corporate entity ownerships do not identify names within public records.
"It's a bit more challenging to find out the names of partners in an LLC, s-Corp or LLP but it can be done," said Jeffrey M. Verdon, managing partner with Jeffrey M. Verdon Law Group in Newport Beach, Calif.
Ownership is typically traced through the general partner.
"The manager or general partner of the trust structure is required to register as the manager and is part of the filing for the state of the entity," Verdon told MainStreet.
The wealthiest of the world's population has real estate holdings which are worth an average of $26.5 million each, and Savills estimates that 35% or 6,200 of these global big ticket deals were only possible because of private funding.
"We forecast that the ultra high net worth population will grow 22% by 2018 and its combined wealth of $27.8 trillion is expected to total more than $36 trillion by 2018," said Mykolas D. Rambus, CEO of Wealth-X. "This presents huge opportunities for those involved in global real estate investment to create the right product in the right locations."