Real wealth in real estate

Written by Raj Kumar Ray | Updated: Jan 20 2014, 21:18pm hrs
Real estateThe total value of the world?s real estate is now around $180 trillion, of which 72% is owner occupied residential property. Reuters
The global economy is still on a recovery mode but that has not stopped the worlds uber-richs wealth from growing. Private wealth is increasingly shaping the worlds real estate markets, with private equity in major property deals nearly trebling since 2009. Real estate now accounts for around a fifth of the invested wealth of the nearly 200,000 ultra-high net worth individuals (UHNWIs) in the world, according to a survey by global real estate advisor Savills and Wealth-X.

The total value of the worlds real estate is now around $180 trillion, of which 72% is owner occupied residential property. Of the $70 trillion that is investable, and therefore traded regularlyincluding $20 trillion of commercial propertyover half is being bought by private individuals, companies and organisations.

The Savills-Wealth-X report says $5.3 trillion of the worlds total real estate value is owned by UHNWIs who comprise a small fraction (0.003%) of worlds population. Wealth-X forecasts the UHNW population to grow by 22% by 2018 and its combined wealthcurrently $27.8 trillionis expected to total over $36 trillion by 2018.

Whats interesting, European and Asian UHNWIs hold by far the biggest share of all privately-owned real estate, together accounting for almost 80% by value totalling $4.2 trillion. European real estate markets are the largest, having attracted the most inward investment globally , relative to size, with London being the standout global destination for private inward real estate investment.

Apart from the investment trend, what the survey also reveals is a wide disparity in income distribution and investment in real estate. While North America accounts for 35% of world private wealth, the region accounts for just 7% of wealth held in real estate. In contrast, the Middle East accounts for just 3% of global private wealth but holds 26% of real estate wealth. One reason for this could be that the uber-rich in North America have invested their wealth in a diverse portfolio predominantly in financial assets whereas the sheikhs of the Middle East have invested more on real estate than in financial assets. This should be a key take away for policymakers in India, which is witnessing a decline in the ratio of financial-savings-to-GDP ratio in recent years and higher exposure in gold and real estate.