U.S. millionaires view real estate as the top alternative-asset class to own this year, according to a report by Morgan Stanley. Direct ownership of residential and commercial properties is investors’ top choice for 2014, followed by investments in real estate investment trusts.
The survey, released last week by the Wealth Management unit of New York-based investment bank Morgan Stanley, reveals that about eight out of ten, or 77 percent of investors with $1 million or more in assets already own real estate. Direct ownership of real estate is their number one choice for alternative investment, with one third admitting they expect to purchase this year. Another 23 percent of the millionaires surveyed say they plan to invest in real estate investment trusts.
Experts explain that now fixed-income yields are still extremely low, while equities climb and investors are looking again at the rebounding real estate market. Citing data from Green Street Advisors, Bloomberg reports that American property values in the commercial market increased 8 percent in the year ending January 31, and went up 71 percent since their bottom low levels in 2009. Last month, the S&P/Case-Shiller home-price index in a total of 20 cities jumped by the most in nearly eight years, or up 24 percent from its 2012 low.
Gary Kaminsky, a vice chairman at Morgan Stanley Wealth Management, said that a year after the Standard & Poor’s Index increased by 30 percent, some wealthy investors prefer to shift from traditional strategies of finding outperformance and to look at alternative investments like real estate and private equity. According to him, the reason for searching alternatives comes from the fact that stocks are getting pricier, while at the same time interest rates remain stable or even report a decline from the past two years. It appears that the ones more concerned about losses are the wealthy, high-net-worth investors.
According to the report, after real estate and real estate investment trusts, the third-most popular preference for alternative investment in 2014 is collectables, with 20 percent of rich investors planning to purchase. Next on the list come private equity and precious metals, with 19 and 16 percent respectively.