Around twenty years ago, someone looking to invest in property would not have to think twice about where prime real estate would lie. The real estate market was monopolised not beyond a few key cities such as Los Angeles, New York, London, Paris, and Tokyo. In 2023, however, the real estate investment landscape has diversified greatly with wealthy individuals buying more properties all over the globe than ever before.
While better returns will always be part of the equation in choosing the kind of properties to acquire, market trends also show how the world’s wealthiest are also simply looking to achieve a better quality of life and more interesting, novel experiences.
The Authenticity Of Foreign Destinations
Trends show that the wealthy are not looking for new heights of luxury per se. Luxurious holiday destinations like Monaco, Paris, London and New York already cater to those impulses. Rather, a burgeoning desire is to experience that of the authentic. The wealthy want to get into the trenches, so to speak, and see what living on a French vineyard or a Moorish castle estate is really like. Buying domestically cannot always recreate these experiences. A mansion in California’s Napa Valley is not the same as visiting traditional Italian villages in Tuscany.
Geographical Amenities
The wealthy are also buying properties overseas so that they have a convenient base near world-renowned amenities and attractions. Wealthy Americans, for instance, want properties along the French Riviera for easy access to international events like Cannes Film Festival and the many beautiful harbours for their yachts with a view of the Côte d’Azur. At the same time, British and French nouveau-riche are seeking mansions up in the hills of Hollywood for closer access to movie studios and a social life near celebrities.
In some cases, it’s just a matter of being near what isn’t available elsewhere in the world. For example, owning a hideaway in the Andes or a Caribbean villa becomes a popular investment for wealthy Swedes who want to feel the Barbadian sun on their skin.
Varying Tax Regimes
Tax incentives have also encouraged hundreds of Americans to flock to Puerto Rico in search of a better life, according to Dorado Beach, a Caribbean residential resort.
In 2019, US parliament passed an act allowing American citizens to become “Resident Individual Investors,” shielding them from Puerto Rico taxes for around half of the year. The new tax policy, Dorado Beach says, make it more attractive for Americans to live and work on the island, creating an urgency to snap up available properties before prices rise.
Of course, Puerto Rico isn’t the only country offering the wealthy various tax advantages. Monaco, Spain and several other European nations are looking for ways to attract investments. Dorado Beach says that the Puerto Rico tax experiment is turning the small island into a mecca for worldwide services exports, encouraging more people to emigrate and experience the financial benefits for themselves. “The US Internal Revenue Code generously exempts Puerto Rico sourced income from federal income taxes,“ Dorado Beach reports. “Puerto Rican residents pay minimal or possibly no taxes on interest, dividends and certain capital gains.”
Diversification
At the same time, diversification is playing a role. Many wealthy people want to spread out their real estate investments to avoid the sort of collapses seen in places like Detroit. Reducing risk in their home country is a priority.
The reasons for this come down to basic economics. Any number of factors could lead to wealth destruction at home, increasing the allure of investing abroad.
Political instability, for instance, could lead to soaring real estate prices in one year and collapsing prices in the next. Currency fluctuation could also be an issue, particularly if the home currency loses value consistently over time. Domestic assets tied up in US Dollars, Pounds or Euros could see their relative purchasing power against the Australian Dollar or the Chinese Yuan fall significantly.
There are local economic downturns too, like the one recently experienced in the UK and Europe. Investors want to make sure their assets are out of harm’s way when regional events like these occur.
Healthcare Benefits
The wealthy are also buying properties overseas to gain access to better healthcare. Organisational failures in Western countries mean that obtaining medical attention at a reasonable price is becoming more challenging. Even insured individuals in the U.S. can sometimes struggle to get rapid access to the treatment they need without jumping through hoops
The situation in foreign countries is different. Clinics remain relatively empty and local doctors often receive training at Western schools. The result is high-quality care that feels personalized and easy to access without excessive costs, deductibles, or insurance fees. A lot of wealthy are choosing to simply pay out of pocket when they require care, trying their luck.
Securing Residency
Lastly, many of the wealthy are buying properties overseas as a way to achieve residency, gaining access to multiple passports. Some see it as a way to keep their options open. If something were to happen in the US, Canada or Germany, they could instantly move to the Maldives, Australia or Indonesia.
This option is particularly appealing to those who don’t want to own yachts and move from port to port through the high seas. Multiple residencies gives the freedom of remaining in specific countries for as long as they wish without needing to renew visas.
The threshold for obtaining residency permits through so-called “golden visas” can be relatively low. Most countries ask for around US$500,000 to be invested in local properties, with discounts if money is pumped into poorer areas. Ultimately, the reasons for this global property-buying binge are as diverse as the the types of billionaires out there themselves.
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