World's Ultra Wealthy Hold $5.3 Trillion in Real Estate

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The world's ultra wealthy now hold a fifth of their invested wealth in real estate, as private wealth increasingly shapes global real estate markets.

The use of private equity in major property deals worth at least $10 million is almost threefold what it was in 2009, according to the analysis from Savills in association with Wealth-X.

Approximately three percent, or $5.3 trillion, of the world's real estate value is owned by the almost 200,000 ultra high net wealth individuals (UHNWIs) in the world. This segment, the wealthiest 0.003 percent of the world's population, has real estate holdings worth on average $26.5 million each.

"Global real estate is mostly residential and held by occupiers, but private owners are becoming more important in the world of traded investable property," Yolande Barnes, head of Savills world research, said in the report.  "Since the 'North Atlantic debt crisis' of 2008, sovereign wealth funds, wealth management companies, private banks and family offices have stepped into the property deals that corporate bankers have deserted." 

Savills estimates that approximately 35 percent, or 6,200, of large global deals, greater than $10 million, in 2012 were possible because of private funding.

The UHNWIs with the largest share of all privately owned real estate are found in Europe and Asia, accounting for approximately 80 percent by value. European UHNWIs hold 31 percent of their wealth in real estate, while Asians hold 27 percent, with a total value of $4.2 trillion, Savills reports. 

A study last October found the number of UHNWIs in Asia-Pacific grew faster than any other global region in 2012. 

The new report also analyzed the way private money is invested in global real estate. It found 44 percent of UHNWI investors in Africa and 66 percent in Latin America come from outside the region. 

Going forward, the research predicts great opportunities for those in global real estate creating the "right product in the right locations."

"We forecast that the UHNW population will grow by 22 percent by 2018, its combined wealth -- currently $27.8 trillion -- is expected to total over $36 trillion by 2018," said Mykolas D. Rambus, CEO of Wealth-X.

Investment strategies for ultra wealthy individuals is forecast to shift in years to come. 

"In recent years there has been a tendency for UHNWIs to focus on 'safe haven,' trophy properties for capital growth and wealth preservation," Barnes said. "In future, we anticipate that some will begin to seek more productive, long-term income-producing positions."