An Explosion of Global Wealth, Funneled Into the Real Estate Market
Amid unprecedented socioeconomic ups and downs on nearly every front over the past few years, global wealth has managed to hit record highs.
Over the course of 2021, aggregate global wealth grew by 12.7% to an estimated US$463.6 trillion, the fastest annual growth rate ever recorded, according to the Global Wealth Report 2022 from Credit Suisse.
Even when adjusted for inflation, Credit Suisse estimates real wealth to have increased by 8.2% in 2021, still significantly higher than the average annual growth rate of 6.6%. The U.S. added the most household wealth in 2021, with China, Canada, India, and Australia rounding out the rest of the top five, according to the report.
Unsurprisingly, this explosion in personal wealth has translated to an influx of luxury buyers—and an increase in price points—in high-end property markets across the globe.
This increase in the wealth of would-be buyers has, unsurprisingly, been a driver for increasing prices.
One of the most dramatic stories has been unfolding in Puerto Rico’s high-end market, where an influx of wealthy buyers has combined with increasingly luxurious new developments to create eye-popping price jumps.
“It’s not really an emerging market, but it is in many ways, too, and people were kind of surprised by what happened in the last two years,” says Oriana Juvelier, vice president, Puerto Rico Sotheby’s International Realty. “Before I sold a US$30 million home [in 2021], our highest sale price in the last two years had been US$6 million, and before that, it was like US$2 million.”
“The numbers have increased because the types of properties that are getting built have changed and developers started catering to higher-end clients, and clients are starting to take notice,” Juvelier says. “It steamrolled from there. One house is selling at US$10 million, the next at US$12 million, the next at US$20 million, setting record after record.”
As wealth begins to shift into the hands of younger generations, younger investors are increasingly putting their assets into holdings such as cryptocurrencies or environmental, social, and governance investments instead of traditional stocks, according to the 2022 Bank of America Private Bank Study of Wealthy Americans. The 21- to 42-year-olds surveyed held only a quarter of their portfolios in stocks, while for investors ages 43 and above, that number was 55%.
One of the few things every age demographic can agree on is the evergreen appeal of property. Unlike other categories of assets, real estate investments drew nearly equal amounts of interest across all age brackets, according to Bank of America.
All told, Credit Suisse notes that “some reversal of the exceptional wealth gains of 2021 is likely in 2022-23 as several countries face slower growth.” But in the longer term, the picture remains positive. “We would expect global wealth to increase by US$169 trillion by 2026, a cumulative rise of 36%,” Credit Suisse writes in its report.
The Return of the Indian Buyer
This keen focus on real estate investment is hardly limited to well-off American buyers, and in the past year, ultra-high-net-worth individuals from India have flexed their purchasing power across the globe. (India saw a 12% overall year-over-year increase in total wealth in 2021, according to Credit Suisse.)
“While ultra-high-net-worth individuals [in India] turned to the domestic market during the pandemic to purchase high-end luxury real estate, this year, they are looking at international gateway cities,” says Akash Puri, director of international business, India Sotheby’s International Realty. “New York, Miami, Toronto, London, Lisbon, Dubai, Singapore, and Sydney are among the top favorites.”
“The volatility and uncertainty in recent years have encouraged wealthy Indians to apply for residence opportunities via investment in real estate or an alternate passport,” Puri adds.
In the United Arab Emirates, Indians constitute 43.5% of the total population, Puri says, and Indian buyers are also “among the highest number of property owners in London.”
“With the rise of the global and financially savvy Indian, buying a property is not wishful but a necessity to enhance the wealth portfolio,” Puri notes. “From a second home, the shift is now to a prudent investment decision.”
Where Are Asian Buyers Focusing Their Attention?
After the U.S., China ranked as the country with the second-highest number of ultra-high-net-worth individuals in the world last year, per Credit Suisse, with a 15.1% annual increase in total wealth in 2021. As such, Chinese buyers (and wealthy investors from across Asia) continue to make their mark in global property markets.
In Korea, while the majority of buyers remain local, “leading foreign buyers are from mainland China, the U.S., and Japan,” says Dr. Lei Wang, chairman, Korea Sotheby’s International Realty. “We also see growing interest from Taiwan and Europe. International high-end buyers prefer branded luxury apartments in Gangnam.”
Buyers from all over the Asian-Pacific region make up a good percentage of clients for Tyson Clarke, senior sales executive, Queensland Sotheby’s International Realty, with the most coming from Singapore, Vietnam, and Hong Kong. Many are looking for primary homes, and are particularly interested in “key blue-chip suburbs within 10 to 15 kilometers of the Central Business District,” Clarke says. “With the [2032] Olympics coming, many are looking to position themselves close to new infrastructure and games activity.”
In the Los Angeles area, Asian buyers are interested in either gated communities or beachside homes in the Newport Beach area or homes in classically high-end Los Angeles neighborhoods, such as Beverly Hills and Bel Air, says Neyshia Go, senior global real estate advisor, Sotheby’s International Realty - Beverly Hills Brokerage. Go has seen a sharp increase in activity since the second half of 2022. “More and more people are looking to invest at least some of their money in Los Angeles, partly because of the geopolitical situation in Asia,” she says. She’s seen buyers from Taiwan, China, and Singapore mostly. For the most part, buyers from Asia want a good view and a newer house. “They don’t want some of the issues that come with an older house,” she says.
More from the report
Discover how these trends may impact your city
The Sotheby's International Realty 2023 Luxury Outlook Report is an ambitious exploration into high-end residential markets across the globe and identifies trends that are likely to shape the coming months in luxury real estate.
© 2023 Sotheby’s International Realty. All Rights Reserved. The Sotheby’s International Realty trademark is licensed and used with permission. Each Sotheby’s International Realty office is independently owned and operated, except those operated by Sotheby’s International Realty, Inc. The Sotheby’s International Realty network fully supports the principles of the Fair Housing Act and the Equal Opportunity Act. This material is based upon information which we consider reliable but because it has been supplied by third parties, we cannot represent that it is accurate or complete and it should not be relied upon as such. All offerings are subject to errors, omissions, changes including price or withdrawal without notice. If your property is listed with a real estate broker, please disregard. It is not our intention to solicit the offerings of other real estate brokers. We are happy to work with them and cooperate fully.
Do Not Sell My Personal Information | Privacy Policy | Terms of Use | Accessibility Statement