Ultra-wealthy private investors have emerged as a key factor in the continued development of the property markets of the world's leading cities, filling the hole left by corporate players in the wake of the debt crisis.
A report released this month by Savills indicates that wealthy private individuals are playing a pivotal role in the ongoing development of the world’s leading global cities, picking up much of the slack created by the reluctance of banks to lend to corporate property groups in the wake of the Great Financial Crisis.
The Streets of Gold report indicates that affluent private investors are behind over half of all major global real estate deals, making a critical contribution to the revival of a sector still reeling from the debt crisis.
According to the report, around 35 per cent of deals around the world valued in excess of $10 million were only made possible because of funding from private individuals.
“Since the debt crisis they [private investors] have stepped into the property deals that corporate bankers have deserted,” the report said. “The willingness of private wealth to take the place of debt finance, or to take a high-risk development position, is now making the difference between deals done or schemes mothballed.”
In London, examples of key developments largely in the hands of individual private investors include One Hyde Park, which is owned by a joint venture between the Candy Brothers and Sheikh Hamad bin Jassim bin Jabr al-Thani, the former Prime Minister of Qatar; as well as an ambitious project to create a replica of the Crystal Palace of the mid-ninetieth century, which has been launched by Chinese property tycoon Ni Zhaoxing.
Observers fret that the increasingly prominent role of private investors in the property markets of the world’s leading cities could have retrograde consequence, leading to a situation redolent of those inegalitarian eras of history when land ownership was dominated by aristocracies.
Anna Minton, author of Ground Control: Fear and Happiness in the Twenty-First-Century City, wrote in The Financial Times that the current model of development is reminiscent of the situation which prevailed in 18th century London, when large swathes of the city lay in the hands of an exclusive coterie of dukes and earls.