A recently published report, Wealth Report 2010, explains how great fortunes invest at this time.

This report focuses on behavior that has developed the global real estate sector in the economic crisis, noting a positive outlook for the future.

Both sponsors of the Wealth Report 2010, Knight Frank and Citi Private Bank, indicate that, globally, this market spends 33% of the investment in property, 24% in bonds and 17% in cash. The rest of the money is distributed in hedge funds and others.

When investing in property, capital growth and stability of investments were considered more important than profitability.

This type of investor relies more on his own master at the time of making investment decisions. Investors with great economic potential in the world are cautious about their investments this year, but in the long term, real estate assets remain a key aspect of their economy.

Among Europeans, there is a clear preference toward the real estate investment, allocating large fortunes 48% in real estate assets.

A clear recommendation to invest at this time would be:

• Investing in emerging residential market.
• Investing in top-level areas of large cities developeds.

During 2009, 75% of residential products that worth more than € 1,000,000 were depreciated, while charging prices suffered a decline. In late 2009 it began a slow recovery in more dynamic markets, for example, New York. The regions of Asia Pacific, Africa, South America, rose in 2009 from 7% to 52%.

Highlight the revaluation of buildings in cities such as:

• Shanghai, 52%
• Pekín, 47%
• Hong Kong, 41%
• Johannesburgo, 17%
• Singapur, 17%
• Yakarta, 14%
• Munbai, 11%
• Rio de Janeiro, 10%

In contrast, prices fell in Dubai, Algarve and Dublin over 25%.

The more luxury housing demand is in cities like London, New York, French Riviera, Miami and Washington, because they have emerged as attractive investment opportunities in high-end residential market.

Also highlight the difficulty of access to credit by the private sector, which causes a drown for the new business and business growth, due to lack of liquidity.

In Spain consider that the number of persons of high economic potential has been reduced by 18%. But within an economic and political situation very delicate, is a country as an investment opportunity, mainly owing to the price correction has been the residential sector.

To view the full report, click here.

The “real estate crisis” has affected several countries. We can make a comparison between Spain and the UK to see the evolution in each of these housing markets.

Referring to the residential housing market:

• In the UK, prices have fallen more quickly than in Spain, as sellers have assumed that without this prices decrease, the sale would not expedite. In addition, must take into account that the actual price drop by the devaluation of the pound, prompted investors to find properties with a discount of up to 50%. It has made that the real estate market in England is now already beginning to recover.
• In Spain the price reduction has been much lower and in the segment of luxury homes, this reduction has barely noticed. It is anticipated that the recovery in Spain will start between 12 and 18 months.
• Unlike the office market (see below), in the housing market there is a glut and excess debt; the worst is behind us yet. Even so, as discussed in the article of 26/11/09 La Vanguardia, in Barcelona and Madrid real estate begins to pick up.

About office market:

• In Spain, the real estate market is about to bottom out, as it has been noticed some cuts in prices for office, sometimes exceeding 40%. But this is clearly a market that has always had a shortage of supply.
• The office market in Spain has suffered the fall in rents, which has been linked to changes in the economy. When the rents are lowering, there is more risk for investors. If the economy recovers, rising consumption and improved incomes. Potential investors must be, therefore, very attentive to the evolution of the Spanish economy.
• Rental contracts in Spain are normally 3 to 5 years, unlike England, where contracts are much longer.
• Spain remains an attractive country for investment. A German investor particularly like to invest in Spain.

 The Spanish financial entities, and we talk about banking in general, seems unwilling or unable to dispose of their property, at least at current prices. The big question would be: Why should I sell now if within 8 months I get a 15% – 20% more? The answer is given: If these entities sell now, will always be at a price lower than that recorded in its books and, therefore, prefer to wait until the market recovers a bit.