The Changing Face of Property: How HNWI Are Making Real Estate Work Harder For Them

  • The Changing Face of Property: How HNWI Are Making Real Estate Work Harder For Them

    The Changing Face of Property: How HNWI Are Making Real Estate Work Harder For Them

We all know it: prime real estate remains one of the preferred assets of high-net-worth individuals (HNWI). Prime property will – naturally – fluctuate in value. Still, it will generally appreciate over time, but ultimately it tends to appreciate, making it in many ways something of a safe haven asset. The FT recently wrote about how property is the oldest asset class, and it still dominates modern wealth asset allocation. And does this really surprise anyone?

Investing in prime property is so popular for HNWI because generating returns is generally a case of ‘when’ rather than ‘if.’ You only need to compare the prices of property ten years ago and today in any prime markets to see a near-universal increase in value. According to one report, it’s thought that 2021 average property prices in London (comprising of flats, terraced homes, semi and detached homes) had increased in value by more than 700% between January 1995 and August of this year. Of these, the average price of a detached house had increased in value by more than 1100%.

And it’s not just London. The UK has seen a boom in property prices, and in France, property prices have doubled in the past ten years – significantly more in some areas of Paris. There are similar trends in most prime markets: Ibiza, coastal Andalusia, the French Riviera, and Switzerland to name a few.

Property valuations are fluid, and, of course, profits aren’t guaranteed. More than simply playing your cards right, you need to be able to time things well, too: selling property at the height of the 2008 financial crash was hardly a good time for investors to dispose of property. The market also stalled (if only shortly) in March last year when lockdowns first came into effect, and everyone tried to work out how to navigate the unexpected. In other words, we’ve seen dips before, and we’ll see them again. But overall, time is generally a good friend to property and provided the investor can afford to wait for the right time to sell, solid returns are a very real possibility in the long term.

New Thinking: Maximising Property Assets

Some property investors are contented to let things play out, holding luxury property and waiting for it to appreciate in value before they go on to sell it at a profit. It’s a sound strategy, but increasingly, not one that works for every investor.

More and more often, we’re seeing HNWI and their advisors are looking at how owners can make their properties work harder for them during the period the individual owns them. The thinking is focused on optimising the asset as much as possible: maximising financial returns by using the equity tied up in the property as it’s appreciating.

HNWI and their advisors are increasingly turning to bridging finance as a mechanism to unlock capital tied up in investment property. Using the property as collateral for a short-term loan, the HNWI release equity tied up in the property and deploy or invest it in other ways. The loan is repaid either by selling the property at term, refinancing the loan, or paying off the loan through a liquidity event. Because the HNWI retains ownership of the property for the duration of the loan, they can continue to use it as usual (as a holiday property or part-time residence, for example) or continue to generate rental income from it as usual.

What Can HNWI Use Equity Released From A Property For?

Many lenders will only allow equity released from properties to be used for very specific reasons – to buy a new property, for example. Tenn, however, will lend for many aims, and we aren’t limited to lending for property purchases. Nearly a third of the enquiries we receive are from HNWI, who are looking to release equity from prime property to create liquidity to invest in various projects.

Tenn will lend against prime property, allowing HNWI to use the loan to:

  • Invest in ambitious ventures (investments, diversify assets, create liquidity to solve problems etc.)
  • Grow a business (acquisitions, investment into growth, working capital, etc.)
  • Invest in a high-ROI project
  • Buy other appreciating assets
  • Consolidate or pay off debt

We can lend in scenarios where there is an international component (funds are deployed internationally), or we are lending to a structure or where a structure holds the asset.

Get in Touch

If you or a client would like to understand more about how Tenn lends, or explore potential scenarios, get in touch. We’d be delighted to have an informal chat and explain more about our process and your possibilities.