The 2012 edition of The Wealth Report from Knight Frank and Citi Private Bank, reinforce the increasing influence of global wealth flows into prime property and investment markets.

The newly wealthy from the world’s fastest-growing emerging economies rate stability, business transparency and education systems as the most important factors in a global city; prices of luxury housing in locations with this magic formula have been underpinned by their interest.

In Europe, despite the past year’s continental recession, the main luxury market hotspots have remained relatively buoyant – as 8 of the 10 top locations in the Knight Frank Prime International Residential Index (PIRI) price rankings are in the UK, France or Switzerland.

Prime property is a key part of portfolios – 2011 saw a global increase in allocation to real estate of 19%; the largest climbers in 2011 popularity for investment were bonds (+65%) and cash (+60%).

According to the report, lifestyle and investment remain the key drivers for luxury second-home purchases, with 16% of all HNWIs surveyed already owning a ski chalet, and 40% a beachfront property. The US and UK are the top second-home destinations for the rich.

“This year’s Wealth Report contains even more evidence that the world’s wealthy are weathering the economic slowdown better than the wider population, and nowhere is this better reflected than in prime property markets,” said Andrew Shirley, the editor of The Wealth Report. “Those markets considered “safe-haven” locations continue to attract private investors looking for both prime residential and commercial property. Political and economic uncertainty across the world is only helping to exacerbate the trend.

According to Luigi Pigorini, CEO Citi Private Bank Europe, Middle East & Africa: “Wealthy individuals and families, especially those originating from Europe, the Middle East, Africa and Asia, have become extraordinarily global in nature. Many seek the rule of law and stability that make the UK a top choice for investment. With English a popular second language and a relatively weak pound, the global wealthy have confidently focused their interest on London and the wealth preservation it can afford.
“Investors seeking a more conservative strategy have gravitated toward high-quality properties in central business districts in cities such as Beijing, London, Munich, New York, Paris and Sydney. Conversely, for those willing to accept more risk, high growth markets, such as Asia and Latin America, may be able to generate more attractive returns relative to the US and Europe.”