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Investment habits of the world's ultra-wealthy

Investment habits of the world's ultra-wealthy

The most recent US economic cycle at more than nine years, was double the average length of the preceding 33 cycles. This trend was not limited to the US; the UK was nine years into its cycle and Australia, more than 27 years into its cycle.

While several economies were experiencing elongated business cycles before the outbreak of the COVID-19 pandemic, their long-term growth rates were still moderating. More so, these slowing growth rates fed into lower average interest rates. Real estate, however, emerged a strong contender — real estate as a diversifier provides the relative stability that equities lack and the income that low yielding bonds negate.

Unsurprisingly, there has been a marked increase in cross-border capital flows to diversify risk on investments and chase enhanced returns. In particular, there has been a significant uptick in foreign investment in commercial real estate (CRE). Although, this trend of cross-border investment is not limited to CRE; foreign investment in residential real estate too has seen heavy growth.

The world’s population of wealthy individuals has risen — over the five-year period leading up to 2018, the number of millionaires has grown by 13% and the number of ultra-high net worth individuals (UHNWIs) by 18%. With their tendency to second passports, increasingly, the wealthy invest in real estate — and more specifically, second and third homes outside their countries of residence.

Dubai’s real estate market has emerged as an attractive prospect for domestic as well as foreign investment in the Middle East. Over the last few years, foreign investment in Dubai has seen exponential growth across the industrial, retail, offices and leisure sectors and, in particular, across the Dubai residential property market.

The reasons to invest in Dubai real estate continue to grow. Its high ranking as a business and geographic hub, its high ranking across the quality of living measures and, crucially, the favorable property tax in Dubai — when compared to alternatives, no additional levies are incurred by foreign investors in Dubai real estate. There are also other compelling residential real estate market trends such as the affordability of Dubai residential real estate relative to cities such as London, New York, Hong Kong and Monaco.

This report by Knight Frank Research details the leanings seen across UHNWIs investments, as well as the residential property market trends drawing foreign investors in the Middle East to invest in the Dubai property market.

Click download to read the full report and understand the economic cycles that result in investment wealth.

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