_How do the ultra-wealthy’s investments of passion impact property?

The top 10 most popular passion investments collected by Australian UHNWI are art, classic cars, wine, jewellery, watches, coloured diamonds, rare whisky, furniture, luxury handbags and coins – in that order.

However, Knight Frank’s Luxury Investment Index (KFLII*) found the best performing assets over 2021 were wine (growing in value by 16 per cent), watches (16 per cent), art (13 per cent), rare whisky (nine per cent) and coins (nine per cent).

At the end of 2021, the Knight Frank Luxury Investment Index, which is the weighted average of individual asset performance, rose by nine per cent, being the strongest annual growth since 2018. Over the past 10 years the growth has totalled 123 per cent.

The ultra-wealthy need somewhere to store their investments of passion, so are these investments impacting what types of residential property they buy, or the attributes of the homes they purchase?

Image: Villa Black Rock in Dubai

Security is the biggest factor for items that can be stored at home

There is a growing buyer focus on security to store and protect items of worth, including smaller investments on passion such as watches and jewellery, said Erin van Tuil, Partner and Head of Crown Residences at One Barangaroo.

“In One Barangaroo our apartments don’t come with a safe as a standard feature but I know a lot of people have installed them after buying,” she said.

“Equally our building is tremendously secure and that gives people a lot of comfort in terms of keeping high value items within their home.

“It’s probably the most secure building in Sydney in terms of the technology we have – it’s top of the range, including facial recognition. You can’t move around without being spotted.”

Adam Ross, Knight Frank Associate Director, Prestige Residential, said there was growing demand for home automation from buyers, which had a security factor.

He said luxury buyers could monitor if people were on their property via an automated security system.

Many items are stored in suitable facilities

Aside from a desire for greater security, investments of passion aren’t having a huge impact on what the ultra-wealthy want in a luxury property – at least not yet.

That’s because many collections would be stored elsewhere, particularly if UHNWIs are living in an apartment.

For example, while wine storage in a home is important for UHNWIs, serious wine collectors would usually be warehousing the collection somewhere else, under specific conditions, said Ms van Tuil.

“It’s unlikely you would have it all at home,” she said. “It would be stored somewhere else and you would have someone else managing it for you.”

Likewise, while parking and garaging is something on the minds of luxury buyers, as they have more than one car, often a car collection that is an investment of passion would be stored in a warehouse, particularly for UHNWIs buying an apartment, said Mr Ross.

This, he said, is leading to strong demand for warehouses to store not only car collections, but also motorbikes and jet skis.

“We’re seeing big money spent on cars, and the flow on from that we’ve seen in the past couple of years is that buyers are looking to buy warehouses not too far from their homes,” he said.

“This is particularly the case if they are rightsizing to a luxury apartment or a home that can’t cover or carry that collection.

“Those that have a luxury home in the eastern suburbs are going to look for a warehouse around Alexandria, Mascot, Botany, while on the lower north shore they’ll explore Artarmon or Brookvale and in the upper north shore they’ll look at Hornsby.”

However, Mr Ross said space for a handbag collection within a home was definitely something that was becoming more sought after in Australia, and particularly Sydney.

He said well-known people were fitting out their wardrobes to cater for collections such as Hermes Birkin.

Image: Bathroom and bespoke designed built-in robes at Crown Residences at One Barangaroo 

While art is a consideration for residential luxury property buyers, with many hiring art consultants for their homes, said Ms van Tuil, the surge in non-fungible tokens (NFTs) or crypto art won’t have any impact on residential property as its not tangible.

This growth in NFTs or crypto art was one of the biggest trends identified by Knight Frank’s The Wealth Report 2022.

Sixteen per cent of Australian UHNWI said they now invest in NFTs, compared to 11 per cent globally.

*KFLII is a weighted average of individual asset performance