Los Angeles ranks fourth on the list of main hubs for luxury residential real estate among ultra-high net worth buyers, trailing only New York City, London and Hong Kong, according to a new report by Wealth-X and the Sotheby’s International Realty®.
There are 211,275 ultra-high net worth (UHNW) individuals – defined as those with $30 million and above in net assets – in the world and 79 percent of them own two or more residences.
Los Angeles attracts numerous types of UHNW individuals – but there is a greater concentration of those involved in the media, sports and entertainment industries in this city than almost anywhere else in the world.
Beyond this obvious cluster due to the prominence of Hollywood, Los Angeles offers a wide variety of luxury residential real estate options, together with a lifestyle that has a specific appeal.
Los Angeles’ real estate differs from that of cities like Hong Kong and New York insofar as houses, rather than penthouses, top the list of properties in demand.
These properties command incredibly high prices. For example, earlier this year, a $102 million property was sold – the highest priced property sold in the city this year
“The entire world has always had a fascination with luxury real estate in Los Angeles – hoping for a glimpse of how America’s celebrities live. However, as celebrities and entertainment executives continue to seek privacy, UHNW individuals are considering homes in more remote areas like Malibu or Santa Barbara alongside traditional luxury hot spots such as Beverly Hills or Bel-Air,” said Frank Symons, executive vice president and chief operating officer of the Western region for Sotheby’s International Realty.
The average age of UHNW individuals buying in Los Angeles is 58 and the median net worth is $105 million. Seventy-five percent of them are self-made millionaires.
According to the report, the U.S. tops the list of countries where foreign UHNW individuals seek secondary luxury residences.
The Wealth-X and Sotheby’s International Realty Global Luxury Residential Real Estate Report forecasts that an ongoing shift in the wealth creation cycle from the West to the East, and the growing significance of intergenerational wealth transfers will have significant consequences on the luxury residential real estate market – with a noted emphasis on new developments and a change in investment grade cities.
Below are other key findings from the inaugural report:
• The value of UHNW-owned residential real estate assets increased by 8 percent globally in 2014.
• On average, UHNW individuals own 2.7 owner-occupied residences.
• As of 2014, over 7 percent of the world’s UHNW population made their wealth through real estate, up from 5 percent in 2013.
• Ultra affluent women value real estate assets more than their male counterparts, holding 16 percent of the net worth in such assets, on average, compared to less than 10 percent for men.
• Luxury residential real estate is an asset class typically favored by UHNW individuals with inherited wealth: these individuals hold 17 percent of their net worth in such assets, compared to just under 9 percent for self-made UHNW individuals.
• Luxury residential real estate grew 2 percent faster than the general real estate market.
• UHNW individuals with net worth between $30 million and $50 million typically keep their primary residences for over 15 years and their secondary residences for over 10 years.
Billionaires change one of their four properties, on average, once every three years.
• Secondary residences are typically 45 percent more valuable than primary residences, have twice the square footage and have 10 acres of land.
• UHNW Chinese and Russian multiple homeowners are typically self-made and young. These two clusters are becoming increasingly important buyers of luxury residential real estate around the world.
• Over 6 percent of the world’s UHNW population have relocated their primary residence to a different country from which they were born.
“This research offers an inside look into the global luxury real estate market,” said Symons. “At Sotheby’s International Realty we understand the Los Angeles market. This study adds to that knowledge by providing valuable details on many far-reaching markets, which helps inform our clients’ decisions on where to invest on a global basis.”
The Wealth-X and Sotheby’s International Realty Global Luxury Residential Real Estate Report 2015, which looks at trends in the UHNW population’s appetite for luxury residential real estate across the world, identifies specific attitudes, behaviors and locations that matter to this industry and this wealth segment.
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