Wealthy Investors Plan to Buy More Real Estate, Barclays Says

Nov. 30 (Bloomberg) — Individuals with more than $800,000 to invest plan to increase their property holdings because they foresee better long-term returns than from stocks and bonds, according to a Barclays Plc global survey.

Twice as many people plan to raise their investment in commercial and residential property as intend to reduce it, the Barclays Wealth unit said in an e-mailed statement today. The richer the individual, the greater the proportion of wealth is placed in real estate, the survey found.

“I was surprised how big a share of their wealth property represents,” Mike Dicks, the London-based head of research at Barclays Wealth, said in an interview. “It’s not what I would tell grandma. None of our data suggests that would be a good allocation.”

The global recession pushed down commercial and residential real estate prices in every region except Asia. The value of U.S. shops, offices and warehouses fell 21 percent in the first three quarters of this year, following a 12 percent decline in 2008. Belief that properties are now undervalued was the second most common reason cited for increasing investment.

Real estate investment among wealthy individuals is set to rise to 30 percent of the average portfolio for the next few years from 28 percent now, according to the survey. That excludes properties used as a principal residence. Most rich people, other than the extremely wealthy, should have no more than 10 percent of their assets in property, said Dicks.

‘Emotional Attachment’

“An emotional attachment to bricks and mortar,” can mean that rich investors are often unwilling to sell real estate at short notice and may be less rigorous in measuring its performance as an asset, according to the report.

Investors from Canada and the Persian Gulf were the most likely to increase their property allocations, with an average rise of 4 percent, the report said.Spain was the only country in the survey where more individuals said they would reduce the proportion of real estate investment, said the wealth management division of London-based Barclays. About 60 percent of rich individuals in that country have more than half their assets in property.

Almost 30 percent of British and Indian investors have more than half their wealth tied up in real estate. About 40 percent of the total respondents worth more than 30 million pounds ($49 million) have a similar allocation, Barclays Wealth said. more