Demand for residential and commercial properties by the Ultra High Net Worth population (UHNWI) and High Net Worth population (HNWI) is increasing; from Paris to Moscow, Nairobi to New York. Wealthy individuals purchase several properties outside their home country to enable them for various reasons such as investment, holiday and security especially if the individuals are from that are unstable.
Globally, Hong Kong remains the most expensive residential city market in the world, with an average prime price of US$4,251 per sq ft (US$45,760 per sq m) in 2018, according to a 2019 wealth report by Knight Frank. London and New York remain dominant ultra-prime markets taking second and third place in the Knight Frank rankings with average prime prices currently standing at $3,022 and $2,989 per sq ft.
SAOTA, an architecture and design firm in Cape Town, South Africa has designed properties globally for Africans and non-Africans. Their designs include The Radisson Blu in Dakar, Senegal, MTN HQ in Abidjan, Ivory Coast, Hotel Douala in Douala, Cameroun, Uluwatu in Bali, Indonesia and many other beautiful properties. One of their most expensive projects is situated in Bantry Bay, Cape Town sold for a record price in Africa of $19 million in July 2016.
“We have been working in Africa for the past 18 years. One of our first projects was The Radisson Blu Hotel which opened in Dakar Senegal in 2009. Today we are working on all continents other than Antarctica. SAOTA has done projects in over 83 countries to date, with ARRCC our interior design business and have completed projects in over 70 countries,” says Greg Truen, Director, SAOTA. “We have designed properties in many countries for African clients. Recently in Switzerland, Spain and Argentina for both African and non-Africans clients. We have developed homes for our African clients in Africa and their homes abroad such as in Switzerland.”
The global UHNWI and HNWI population (UHNWI have assets worth a minimum of US$30 million while HNWI have at least US$3 million ) is expected to grow by 22% over the five year period to 2023. Global growth drivers as well as regional and country drivers are underpinning this forecast growth. Despite a slowdown over the last few months due to global trade wars among other factors, these economies are forecast to recover in 2020 with emerging economies anticipated to record an even higher growth rate, this will support the forecast of wealth creation.
Tilda Mwai, Researcher, Knight Frank, Kenya says that the total value of global commercial real estate transactions is estimated to amount more than USD $900 billion in 2018.Knight Frank’s attitude survey also shows that global demand for residential property remains steadfast, with 22% of the global UHNWIs and HNWIs looking to purchase property outside of their home country.
According to Andrew Amoils, Head of Research, New World Wealth, “Despite accounting for 16% of the world’s population, Africa only accounts for 1% of total worldwide wealth. The total wealth held on the continent amounts to US$2.2 trillion. This refers to the private wealth held by all the individuals living in Africa. It includes all their assets (property, cash, equities, business interests) less any liabilities”
“In Africa, commercial real estate demand has been closely followed by demand in prime residential real estate. These include holiday homes, beachfront villas and luxury apartments. Preferred investment destinations in Africa have been the key gateway cities in the continent such as Cape Town, Johannesburg, Nairobi and Lagos,” adds Mwai. “On a country level South Africa continues to top the list as a key destination. In the last quarter of 2018, South Africa attracted US$1 billion dollars of investments.”
“There is a constant demand from African clients and there has been more interest recently. This in part, could be due to the rapid urbanization across the continent,” says Stefan Antoni Director, SAOTA. “Most clients are entrepreneurs, often in Resources, Information Technology (IT) or Finance. Others include Property Development, Communications, Mining and Commodities. We have also worked with substantial hotel groups such as the One & Only, Mandarin Oriental and Aman Resorts.”
The key influencers in the choice of location in Africa have been the availability of amenities such as quality private schools, healthcare systems and transport infrastructure.
Security is also another key factor as are luxury indicators including the number of five star hotels and the quantity and quality of leading restaurants. A focus on the scenic offerings of the continent has also been a key factor in terms of the wildlife scenery, beaches and the favourable weather.
“We have global clients different lifestyles. We understand our clients and their aspirations, lifestyles and needs. From this emerges design that connects built space to external space, the landscape and the view. Our projects exhibit a sophisticated use of materials, precise attention to detail and a refined interpretation of contemporary global luxury, which translates into edgy, yet livable buildings and are, essentially, timeless,” explains Jon Case, Director, ARRCC. “In Africa, Nigeria is one of our top countries for both commercial and residential properties. Nigeria has been busy because people are becoming more demanding about the quality of their personal spaces and have the means to build very high- quality homes.”
Cape Town, South Africa continues to be a preferred destination for a majority of UHNWI and HNWI due to the well-established luxury neighbourhoods, popular holiday destinations coupled with quality amenities such as the University of Cape Town as well as presence of quality transport infrastructure. Key lifestyle indicators such as established luxury car dealerships, clothing and accessory brand stores have also been major factors.
As the global economy slows down, there is an increase in cross border capital flows in a bid to diversify risk and chase enhanced returns. Commercial real estate is a prime example, recently it attracted over $US 1 trillion in investment with a third of this involving cross-border investment. This trend is not limited to commercial real estate and has continued to shape residential markets as well around the world. An increasing trend is the focus on residential sub sectors such as student housing and retirement homes according to the Knight Frank Africa Horizons report.
Globally, in 2019, the cities of Monaco, Hong Kong, New York, London and Singapore were ranked as the top five most expensive cities in the world with an average of 27 SQM per $US 1million. (See the diagram.)