The top alternative investment for U.S. millionaires today is real estate. That, according to a report from the New York based investment bank, Morgan Stanley. During the fourth quarter of last year, the company’s Wealth Management unit surveyed 1,004 U.S. investors ages 25 to 75, with at least $100,000 in assets. Here’s how the report breaks down their investment choices:
- 77% with at least $1 million in assets own real estate.
- Ownership of residential and commercial properties is the No. 1 alternative-investment pick for 2014.
- 23% say they expect to invest in real estate investment trusts, the second-most popular choice.
- 20% chose collectibles as the third-most-popular alternative-investment choice this year.
- 19% selected private equity.
- 16% selected precious metals.
“After a year where the Standard & Poor’s Index rose 30%, some millionaires are moving money out of traditional, long-only strategies to find outperformance, and turning toward alternatives such as real estate and private equity,” said Gary Kaminsky, a vice chairman at Morgan Stanley Wealth Management in New York. “Sophisticated, high-net-worth investors are much more concerned about losses.”
There are many reasons wealthy investors are choosing real estate. First off, fixed-income yields remain historically low. Commercial-property values in the U.S. rose 8% by the end of January 2014, rising by 71% since 2009. According to the S&P/Case-Shiller index, home prices in 20 cities are up by 24%. This trend does not only pertain to U.S. millionaires. Wealthy foreign investors are also buying high-end U.S. properties.
The bottom line: owning real estate is attractive because of the expected appreciation of property value and consistent stream of income through rental properties. Real estate also offers investors better control and supervision over their investments.
These national numbers tell the story of our continued economic recovery. If you are a wealthy investor who sees real estate as a top alternative investment for your portfolio and are looking to invest in San Francisco, please take a look at my website. Whether you are planning to buy or sell, I look forward to sharing my knowledge with you. Just email me at Daniel.DerVartanian@sothebyshomes.com or give me a call at (415) 200-7744.