Millionaire investors shift focus to commercial property

Commercial property and REITs are becoming more attractive at the expense of residential property for millionaire Asia Pacific investors, according to the latest Merrill Lynch/ Capgemini World Wealth Report.

In 2010, the commercial share of real-estate holdings has risen among high-net-worth individuals (those with those with investable assets of US$1 million or more) from 24% to 37%.

By comparison, residential assets as a proportion of real-estate holdings have declined from 60% to 51%, with REITs making up the balance (up from 12% a year ago).

“Commercial real estate is still perceived as an opportunity in the emerging markets of these regions but is languishing in more developed markets,” the report says.

Overall, real-estate investments make up nearly a third (31%) of the investment portfolios of millionaires in the Asia Pacific, up from 28% a year earlier and far above the 19% global average, according to the report.

“Residential real estate remains especially attractive and lucrative for these HNWIs given the strong fundamentals in the region, where the growing middle classes in emerging economies are straining the relatively tight supply of high-quality residential real estate,” the report says.

Globally high-net-worth investors are expected to decrease their real-estate exposures from 19% to 15%, pushing up their equity allocations.

Australia ranks ninth on the list of high-net-worth individuals (above Italy), with 193,000 residents making the elite group. This is up from 174,000 in 2009, a growth of 11%

Globally, the wealth of high-net worth individuals has risen to $47.2 trillion, with Asia Pacific millionaire investors accounting for $10.8 trillion, the second-highest behind North America ($11.6 trillion).