Over the last few weeks there has been an increased number of headlines in the major mastheads noting that many HNW investors believe current commercial property prices are “crazy” and “insane”.
This sentiment has been supported by a number of wealthy investors selling property assets which they feel are fully priced as the cycle reaches its peak.
The headlines accord with the feedback boutique property fund manager Forza Capital (Forza) has obtained directly from its HNW clients over the past nine months. Interestingly, Forza has been made aware that often these sale proceeds are being retained as cash rather than reinvested back into the property sector.
“In late 2016, we started to receive more and more feedback from our family office and HNW clients, that they felt the cycle was very toppy,” said Forza director Adam Murchie.
“Many of them advised that their cash holdings were at the highest proportion of their asset mix for some time; however, they indicated they were comfortable with this because it gave them firepower when the next cycle presents.”
As a result of this feedback, Forza has spent time researching its investor base to see if this dynamic was limited to a select few clients, or it was representative of the majority.
“From the many discussions we have had, there is a general consensus that the cycle is fully priced; increasingly, our investors are extending their cash holdings,” said Mr Murchie.
“HNW investors are still motivated to acquire strategic assets, but the investment needs to meet very strict criteria, otherwise the default position is to sit on their hands.
“In one instance, a client advised the gap between mandates approved by their clients, and the actual investments made, was as wide as they had ever seen.”
Traditionally, HNW investors have been at the forefront of market cycles, quite accurately picking the high and low points and making their investment decisions accordingly.
Mr Murchie said, “These investors do not feel a need, nor do they have a requirement, to be fully invested at all times. As such, they remain patient and use investment fundamentals as their guiding light for investment decisions.”
“The recent headlines come as no surprise to us – this feedback on market pricing has come direct from our clients for some time now”.
