Real Estate Investment is Paying Off for Wealthy Investors

Real estate was one of the key drivers in four in 10 ultra-high-net-worth individuals (UHNWIs) growing their wealth in 2022 despite a year of ‘permacrisis’.

The finding comes from Knight Frank’s latest Wealth research. The study used data from Knight Frank’s annual Attitudes Survey of more than 500 private bankers, wealth advisors and family offices conducted in November 2022, combined with conversations with industry experts. The research revealed that 46% of respondents to the survey cited real estate as the top wealth-making opportunity for 2023.

The study also found that more than two thirds of survey respondents expect their clients’ wealth to increase marginally (47%) or significantly (21%) over the next 12 months. As well as real estate, tech (33%) and equity markets (28%) were cited as top opportunities for UHNWIs to create and grow their wealth in 2023.

Flora Harley, partner, residential research at Knight Frank, commented: “Real estate was the top cited opportunity among 46% of Knight Frank’s survey respondents, whether for its attributes as an inflation hedge or due to the benefits of diversification.

“Many panellists highlighted the opportunity to secure enhanced return profiles a key advantage. Plus, when investing directly, real estate enables greater control and value-add opportunities. One in ten respondents specifically cited looking for attractive valuations and distressed opportunities.”

When asked what the top risks in 2023 are for an UHNWI and their ability to create and grow their wealth, the survey found that inflation (67%), interest rates (59%) and political/geopolitical risks (53%) were highest.

Liam Bailey, global head of research at Knight Frank said: “With 68% of UHNWIs expecting to see wealth growth in 2023, we are anticipating a substantial shift in portfolio strategy – with a search for value opportunities in the real estate sector playing a much bigger role than in recent years.

“Downward pressure on property values, due to higher interest rates, has created a window for private capital – especially as we enter this new market phase with historic lows in terms of the stock of best-in-class property in residential and commercial markets.”