High net worth professionals are more likely than millionaires from all occupations to buy real estate in the coming year, according to Millionaire Corner research.
High net worth professionals take a slightly more positive view of the current real estate market than affluent investors from all walks of life, and are more likely to add to their already sizable holdings, according to a new report from Millionaire Corner.
Nearly half (48 percent) of high net worth doctors, dentists, lawyers and accountants believe it’s a good time to buy real estate, according to our recently released study, Effectively Servicing Professionals. Forty-five percent of total high net worth investors believe current market conditions favor real estate.
Investment real estate makes up 7 percent of total assets held by high net worth professionals, , individuals from households with a net worth of $5 million to $25 million, not including primary residence. Our research shows that in the coming year professionals are more likely to add to these holdings than total high net worth investors. Twenty percent of high net worth professionals say they are likely to invest in real estate in the next 12 months, compared to 18 percent of high net worth investors from all occupations.
(As a group high net worth investors prefer precious metals, such as gold, to real estate, 21 percent to 18 percent, respectively. High net worth professionals are less interested in gold and only 15 percent say they are likely to invest in precious metals in the coming year.)
Interest in real estate goes hand-in-hand with the increased likelihood that a doctor, dentist, lawyer or accountant will own a professional practice, and is linked to professionals’ relatively high sensitivity to inflation, interest rates and tax increases. Commercial real estate can help a professional hedge against inflation, while securing an income stream to offset a potential decline in earnings. Record low interest rates and affordable prices may also increase the economic incentives to buy vs. rent an office building.
More than one-fourth (28 percent) of doctors, dentists, lawyers and accountants own a professional practice, and the mean value of these investments exceeds $1.3 million. Relatively few high net worth investors from other occupations own a professional practice.
Thirteen percent of doctors, dentists, lawyers and accountants are also invested in a privately held business that they control, according to our research, which finds the mean value of these businesses to be more than $2.7 million. Fourteen percent of professionals have also invested in a privately held business that they do not control, and the mean value of these investments is $716,000. Professionals are also three times more likely to have a business loan than total high net worth investors, 12 percent vs. 4 percent, respectively.
Nearly all professionals (99 percent) own a primary residence, and the mean value is $968,000. More than half (54 percent) own a second home or vacation home with a mean value of $625,000. Sixteen percent own undeveloped land, and the mean value of these investments is $818,000. More than one-third (35 percent) own residential rental property with a mean value of $644,000, and 14 percent own commercial rental property with a mean value of $276,000. Eighteen percent own other types of real estate investment, with a mean value of $202,000.