Q. Where do the global rich invest in residential real estate?
Three years ago, there were seven favourite destinations, but there are just three now—New York, London and Dubai. The ones that are [no longer popular] are Hong Kong, Singapore, Geneva and Monaco. They were all strong destinations but, now, with cooling measures in place, they have all become unattractive.
Q. How do the newly wealthy in India and China choose to invest in real estate?
In China, they traditionally would have gone to Hong Kong or Singapore. But now because of the cooling measures, they have to bypass those two places. As a result, they are going to the west coast of America or Canada, Australia and the UK. It is mainly education-driven. Their typical purchase is for $300,000-500,000, but they quickly move on to something more substantial. Having said that, in the last year, the buying has been in places where they can easily get a visa. So Portugal and Greece are on top of the list. They are buying assets that are linked to a visa and these assets are overvalued. Indians are going to places where there is a lot of family—Singapore, the UK and Dubai are top on their list.
Q. Wealthy Indians have had their family offices buy large chunks of residential real estate with the intention of renting them out. Is this something that is likely to increase in the years to come?
One of the most exciting sectors for us is the private rental sector where you have private investors buying whole blocks. This is now becoming a serious investment commodity. In the UK and the US, now there are investors building [properties] only for this category. Student accommodation is another really powerful asset class. Here you provide a one-star hotel with steady occupancy through the year. Since there is a huge undersupply, there is a lot of room for capital growth as well.
Q. How will the London market perform in the next few years?
We believe that between now and 2018, central London will go up by another 16-18 percent. 2015 will be flat and then the uptrend should resume.
Q. Will you ever advise your clients to invest in real estate in Beijing or Shanghai?
These [cities] are two great generators of wealth. But most of it is invested outside. The Chinese market sees a lot of governmental intervention; we are not comfortable with that. We pride ourselves on our research and China does not have any significant historical data that we can rely on.
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(This story appears in the 23 January, 2015 issue of Forbes India. To visit our Archives, click here.)
Real estate returns in Indian residential markets are in very rare cases,over 3 per cent per annum. Any place giving you a rental income above this plus capital appreciation of over 15 per cent per annum would be attractive.on Jan 27, 2015