Recently, Australia’s high-end real estate market has seen an influx of new bidders for elite properties.
In the past, bidders on multi-million to billion dollar properties have always been institutional investors.
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However, many of the recent and current bidders on elite Australian properties have been ultra-high-net-worth individuals, known as "UHNW’s." Ultra-high-net-worth is currently defined as having assets over US$30 million. This can be family units or individuals.
The UHNW Trend
According to Alistair Meadows, who heads capital group Asia Pacific, based in Singapore, properties worth US$100 million or more, which used to be sold exclusively to institutional buyers such as managed trusts, listed companies or private equity groups. Now, they are being sold to an increasing number of ultra-high-net-worth individuals or family groups.
Bright Ruby Resources is an example of the trend. They are a private investment firm owned by the Du family in Shandong, China.
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By GlobalDataSince December of 2012, they have spent a total of US$264 million on two buildings located in Sydney. They are also reported to be a participant in the bidding for an office block that is located on George Street and should eventually sell for more than US$500 million.
In Singapore, Bright Ruby is even more active, paying US$1.04 million on the Grand Park Orchard Hotel, which includes a retail area. This is the highest amount of any commercial real estate transaction in Singapore history. It is possible that Bright Ruby pooled resources with other Chinese ultra-high-net-worth’s to complete the transaction.
In Sydney, a ultra-high-net-worth from Asia spent nearly US$60 million to purchase a shopping centre on the north-west of Sydney. Other office blocks in Sydney are being purchased by ultra-high-net-worth’s for US$40 million and US$45 million respectively.
Dominic Ong works in Sydney for a company called Knight Frank. His position is Director of Asian Markets. Ong’s job is to scout potential investments, such as shopping centres, office towers, development sites and hotels for approximately 20 ultra-high-net-worth investors who are looking to invest amounts from US$20 million to US$100 million. Ong says that he expects multiple transactions involving these investors in Australian real estate.
‘New Money’ Investors are Aggressive
Daniel Harel heads the South East Asia Division for the UBS Global Family Office. According to Harel, the typical UHNW from South East Asia represents "new money." New money investors tend to be more aggressive than "old money" investors who are usually from Europe and expect returns between 10% and 15% on their investments.
So far, only six large transactions involving commercial real estate in Australia have been completed by UHNW’s but they are buying a lot of Australia’s finest residential real estate, including a mansion that sold for slightly over US$20 million in Melbourne, which was the largest residential sale in their history, and a waterfront mansion in Sydney called Altona.
As stated by Justin Smith, Mortgage Broker and Principal of The Mortgage Gallery Rockingham, it is no accident that wealthy people choose real estate as an investment vehicle: "Rich investors become rich by making smart investments."
Smith added: "Real estate has historically been the most consistent long-term investment in Australia; we see no reason for that to change any time soon."
