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The wealthy have gone from chasing trophies to yield, says Knight Frank's Lord Andrew Hay

Lord Andrew Hay, global head of Knight Frank Residential, who advises the rich on their real estate purchases, says property is an attractive asset class even today

Samar Srivastava
Published: May 12, 2016 06:19:46 AM IST
Updated: May 4, 2016 12:32:55 PM IST
The wealthy have gone from chasing trophies to yield, says Knight Frank's Lord Andrew Hay
Image: John Wright

Q. What are the top locations globally for the rich to buy property?
London, New York, Dubai and Singapore are on top of the list. In the last year, Singapore has come up as they have tried to cool the market there. The interesting one to watch out for is Sydney where the quality of what is available is getting better.

Q. Are the rich agnostic to geography?
Increasingly so. Currency plays a huge part now along with the safe haven status and eventual returns. And of course, they look at where they can have a nice lifestyle. We have noticed that people are less location-specific.

Q. Apart from residential real estate, what other type of property do the rich buy?
The hotel sector as an asset class remains attractive. Within the commercial sector, office space and industrial and logistics parks are attractive. The high net worth individuals in a number of different regions of the world represent between 20 and 30 percent of the investor base in these sectors. What is more interesting is that in the last five years, the wealthy have gone from chasing trophies to yield.

Q. Are the rich more circumspect about real estate investments now?
The rich have been more active, but they have slightly less money now (due to the volatility in global markets). The real challenge for them is, ‘What do I invest in now and where do I go?’ If you look at all the asset classes—gold has had a see-saw and commodities and equities are also down—it has been crazy. If you are a rich person with a global view, you are thinking of which asset class to invest in and where to invest—which currency or territory? So far, property has been more stable than most years. It is quite surprising because if you go back 10 years, property was not considered a great asset class since it was fairly illiquid. But in a funny sort of way that makes it quite an attractive asset class at the moment. When you invest $20 million in a house, you are not thinking every morning, ‘What is my house worth today?’

Q. Isn’t expensive real estate taking longer to sell?
Volumes have definitely slowed. But in terms of the length of time it takes to sell expensive real estate, I am not sure if anything has changed. The number of transactions taking place in key markets has reduced.

At the top end of the market, I would say to a client, ‘If you have something that is in today’s money worth $20 million, I would give it three seasons or 18 months to sell.’ At the very top of the market, in any market in the world, the number of buyers who are going to transact in that year is not very high. There would only be around 100 people in New York looking at something over say $30 million and the numbers actually transacting would only be 20 percent.

(This story appears in the 13 May, 2016 issue of Forbes India. To visit our Archives, click here.)

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