Private wealth is increasingly shaping the world's real estate markets and the use of private equity in major property deals worth at least USD10m has nearly trebled 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 analysis from international real estate advisor Savills, in association with Wealth-X, the UHNW intelligence provider.
In Around The World In Dollars And Cents, Savills estimates that the total value of the world's real estate is now around USD180trn, some 72 per cent of which is owner occupied residential property. Of the USD70trn that is 'investable' and therefore traded regularly – including USD20trn of commercial property – over half is being bought by private individuals, companies and organisations. Investing institutions, listed companies and publicly owned entities are becoming relatively less important to world real estate as a result.
Around three per cent, or USD5.3trn, of the world's total real estate value is owned by UHNWIs. This wealthiest 0.003 per cent of the world's population has real estate holdings which are worth an average of USD26.5m 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," says Yolande Barnes, head of Savills world research. "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.
"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."
Savills estimates that around 35 per cent (or 6,200) of global big ticket (>USD10m) deals in 2012 were only possible because of private funding.
Mykolas D Rambus, CEO of Wealth-X, says: "We forecast that the UHNW population will grow by 22 per cent by 2018, its combined wealth – currently USD27.8trn – is expected to total over USD36trn by 2018. This presents huge opportunities for those involved in global real estate investment to create the right product in the right locations."