NEW YORK - (Business Wire) A report published today, prepared by the Economist Intelligence Unit and commissioned by Barclays Wealth, entitled “Prospects for Property: On Solid Foundations?,” examines the outlook for global residential and commercial real estate markets as seen through the eyes of high-net-worth individuals. The study polled over 2,000 wealthy individuals globally in August and September 2009. Barclays Wealth is a leading global wealth manager with offices in 25 countries. This is the 10th report in the Barclays Wealth Insights series. “Now that real estate prices seem to be stabilizing globally, wealthy investors are again thinking about increasing their allocations to this asset class,” says Michael Crook, Alternatives Strategist at Barclays Wealth. “But it’s clear from the survey results that the demand from high-net-worth investors for real estate will depend on the availability of credit and the sustainability of the global economic recovery.”
Despite economic and financial headwinds, high-net-worth individuals have confidence in real estate as an asset class and plan to increase their portfolio allocations to commercial and residential properties in the near term. Of those surveyed, 75 percent of respondents say that residential real estate looks attractive from an investment perspective, but 60 percent of those same investors note that tight credit conditions are preventing them from taking the plunge.
In addition, 26 percent of wealthy investors believe that real estate has better long-term prospects than other asset classes. Just more than half of the respondents expect an increase in the value of their real estate investments over the next two years. Almost 40 percent of respondents with assets of $50 million or more have greater than 50 percent of their portfolio in real estate.
“The survey has revealed that investors are holding a much higher proportion of their wealth in real estate than we would normally recommend,” said Michael Dicks, Chief Economist at Barclays Wealth. “This suggests a real need for people to consider diversifying their portfolios into other asset classes in order to reduce risk.”
Long-term prospects and undervalued opportunities
Residential real estate has many characteristics that set it apart from other asset classes, since it is a long-term investment which is measured over decades rather than years. It’s a tangible asset that offers too many investors perceived security. However, there are significant challenges to holding residential real estate in a portfolio that can be problematic for investors because of market inefficiencies, low price transparency, illiquidity and high transaction costs. Among the key advantages of investing in residential real estate, respondents cited: potential for rental income (38.3 percent); capital gains potential (28.6 percent); long-term performance track record (27.1 percent); overall portfolio diversification; and tangibility of brick-and-mortar investments (19.2 percent).
“Investors find real estate to be an attractive investment for a variety of reasons, including the potential for both capital appreciation and rental income,” said Brian Nick, Investment Strategist. “But we have to weigh those potential benefits against the fact that the real estate market is neither liquid nor transparent, which are also desirable characteristics for assets in a portfolio.”
Lands of opportunity?
Just over 75 percent of those surveyed invest primarily in their domestic real estate markets. Asked though about the overseas country in which they saw the greatest investment potential, a number of interesting points emerged.
The US is regarded as the most promising real estate market by some margin, with 16 percent of respondents selecting this market. Following the US, China and the UK are tied as second-most appealing real estate markets, while India is just behind in fourth place. France, Spain, Canada, Brazil, Germany and Australia rounded out the list of top 10 markets.
In addition, the research shows that among the 10 countries and regions that were most heavily represented in the survey, investors from Middle Eastern countries and Canada are most likely to increase their allocations, while Spain is the only country in which average allocation to real estate is predicted to fall.
“Within the context of their existing real estate portfolios, it is encouraging to see that some respondents are looking overseas,” said Michael Dicks. “However, there is evidence in the report of ‘home bias,’ when investors prefer to focus on the market they know best. Diversification overseas is an important means of avoiding an excessively concentrated real estate portfolio and investors also seem to under estimate how straightforward it can be to achieve this through vehicles like REITS.”
Real estate and gender
The report highlights the distinct role gender plays when investing in real estate. Almost half (49 percent) of the women surveyed consider real estate to be a less risky investment than stocks, compared with 37 percent of men agreeing with that view.
In addition, women are much more likely to enjoy investing in real estate than men: 44 percent of women surveyed find buying property more enjoyable than investing in other asset classes. Only 28 percent of men feel the same way. While 34 percent of men are likely to invest in real estate indirectly through a fund, only 14 percent of women would prefer this approach.
Cautiously Optimistic about the Future
Who is the most bullish about the future? Investors from Canada, Singapore and India, are more optimistic about expected increases in the value of their real estate holdings over the next two years. While those from Spain and the Gulf Corporation Council countries are less so.
About Barclays Wealth
Barclays Wealth is a leading global wealth manager, and the UK’s largest, with total client assets of $221bn (£134bn), as at 30 June 2009. With offices in 25 countries, Barclays Wealth serves affluent, high-net-worth and intermediary clients worldwide, providing international and private banking, investment management, fiduciary services, and brokerage.
Barclays Group is a major global financial services provider engaged in retail and commercial banking, credit cards, investment banking, wealth management and investment management services with an extensive international presence in Europe, the Americas, Africa and Asia.
With over 300 years of history and expertise in banking, Barclays operates in over 50 countries and employs over 145,000 people. Barclays moves, lends, invests and protects money for over 49 million customers and clients worldwide.
For further information about Barclays Wealth in the Americas, please visit www.barclayswealthamericas.com or www.twitter.com/barclaywealth.
Barclays Wealth is the wealth management division of Barclays Bank PLC, functioning through Barclays Capital Inc. in the United States. Barclays Capital Inc., an affiliate of Barclays Bank PLC, is a U.S. registered broker-dealer and regulated by the Securities & Exchange Commission. The registered office of Barclays Capital Inc. is 200 Park Avenue, New York, NY 10166. Barclays Bank PLC is registered in England and Wales (registered no. 1026167) with a registered office at 1 Churchill Place, London, E14 5HP, United Kingdom. Barclays Bank PLC is authorized and regulated by the Financial Services Authority. Member SIPC.
About this report
The tenth volume of the Barclays Wealth Insights series entitled “Prospects for Property: On Solid foundations?” is based on a global survey of more than 2,000 wealthy investors, shedding light on investor perceptions of both the residential and commercial property investment markets. Using the global recession as a backdrop, some of the main themes the report explores include motivations for investing in property, the advantages and disadvantages of property as part of the portfolio and where investors are set to invest next.
Methodology
It is based on two main strands of research. First, the Economist Intelligence Unit conducted a survey of more than 2000 high-net-worth individuals, with investable assets ranging from $800,000 to in excess of $48 million (£500,000 to in excess of £30 million). Respondents were based around the globe, with the highest numbers of respondents in the United States, Hong Kong, India, Singapore, Canada, Spain, Switzerland, the United Arab Emirates, the United Kingdom and Monaco. The survey took place during August and September 2009.
Second, the Economist Intelligence Unit conducted a series of interviews with economists, senior executives and property experts from around the world.
Barclays Wealth, Corporate Communications
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