The investment case for global property - what ‘the next generation’ wants
We dig into data from The Wealth Report 2021 Attitudes Survey and speak to a selection of Knight Frank’s global property experts to reveal the sentiment of ‘next generation’ wealth
5 minutes to read
Younger ultra-high-net-worth individuals (UHWNIs) or the ‘next generation’ view property differently, according to the respondents (private bankers and wealth advisors) to our annual The Wealth Report Attitudes Survey.
Some suggest there is a higher risk appetite, but many are shrewder in their property investments – viewing them in the wider context of portfolios, with decisions driven by liquidity and returns more than location or emotional attachment.
A full 70% of respondents to this year’s Attitudes Survey said yes when asked Do your younger clients, below forty, have different attitudes towards their property investments? Rising to as much as 86% in Latin America and 77% in the Middle East. More than half of those offered explanation as to why. Our analysis of these show clear patterns across the globe – shifting preferences and a more international outlook.
The most cited attitude is that younger clients manage their real estate portfolios as market portfolios. They see real estate as an investment, not only a home, often with an emphasis on profitability over location. They will look beyond traditional assets, across both residential and commercial and further afield, with a willingness to develop to add value.
Edward de Mallet Morgan, a partner in Knight Frank’s Global Super-Prime team agrees: “Many of the younger generation are happy to speculate and invest in other asset classes, particularly where it is a fun process and something they can share.”
There is still great appetite for property among younger UHNWIs, as Julie Gauthier, of multi-family office Stonehage Fleming, explained in our recent webinar.
Victoria Garrett, Knight Frank’s Head of Residential in Asia Pacific, emphasises that this is especially the case among Asian UHNWIs, where 75% of survey respondents said younger clients had different attitudes. “Property is still very much in the DNA of the younger generations, they may be shifting the type of assets they are looking at to suit their portfolio and how the investment case stacks up, but the appetite is clearly there.”
Christin Li, Knight Frank’s Head of Research in Asia Pacific, agrees: “In Asia we see a lot of accumulated wealth in previous generations because of property, and that desire to own property is entrenched in younger generations. Given the typical family demographic, this wealth is passed on to one or perhaps two children.”
Connectivity is key
However, de Mallet Morgan notes that what the next gen are looking for from a property is changing. “Younger UHNWIs tend to place a higher value on technology, health and fitness and increasingly on running costs and any renewable energy and carbon efficiencies. Connectivity is important, both digitally and physically.”
In addition, how they find these properties is evolving, he points out. “The younger generation is all about the experience, and because they are so busy and so connected all the time they make decisions faster, with much less prevarication.
“They are a generation that has an affinity with visually interesting and attractive content, so if properties are not suitably marketed, they may be missed by the younger generation, even if they might be suitable options. In a similar vein if something looks too expensive, many will simply discount it and not visit, because they don’t want to waste time.”
Garrett echoes this: “The world is a smaller place due in part to physical connectivity and the availability of information. Now anyone can go online, seek out content from trusted sources and explore the local area on Google Earth. In the past year particularly, more and more people have become comfortable with virtual viewings. They can narrow their search before even visiting a place”
Looking beyond borders
The next generation being less tied to one place resonates among our survey respondents. Younger UHNWIs are more geographically diverse, looking outside their country of residence and at new locations abroad.
Part of this will come for the different experiences of younger UHNWIs who are increasingly educated overseas, gaining a global perspective very early on in their lives.
According to The Wealth Report Attitudes Survey, almost half of UHNWIs send their children overseas for university education, rising to 64% for Asian UHNWIs.
“We are increasingly seeing our clients considering themselves as global citizens. Where previously we may have seen property being bought closer to home, or in very well-established markets, the younger generation are looking further afield” says Garrett.
This also rings true with messages from our recent webinar where Julie Gauthier explains her clients see it as a “blessing to have a footprint in other countries”.
Some of our survey respondents noted that the next generation have a higher willingness to rent or are more comfortable investing in rental properties. This seems to be nuanced geographically and may shift because of the pandemic.
From an Asian perspective Garrett and Li state that home ownership is much higher on the agenda and viewed as a status symbol, yet did note a willingness to own multiple homes and be landlords. However, de Mallet Morgan tells us that “Pre-pandemic this was a trend. Whatever the age, people were travelling to more locations and spending less time, wherever they went, so it made sense to rent and experience different locations. Today, given less travel and more time spent in single locations, for holiday homes it now makes sense to buy and, largely, buy something that is all up and running and is not a massive project.”
Even though the motivations and methods may be changing, it is clear that property’s appeal transcends the generations.
