Wealthiest individuals favour property - NCB

The Republic's wealthiest individuals favour property above all other investment types, even though more than half think it is overvalued, according to a new analysis from NCB Stockbrokers.

The study shows that property tends to constitute some 55 per cent of the average high net-worth individual's investment portfolio. The stock market is the next most popular investment, followed by holdings in cash, private companies and bonds.

NCB compiled the study by asking its sizeable base of private clients to break down their investments into asset classes.

The average respondent is estimated to have been worth at least €3 million, with NCB's private clients drawn from backgrounds such as professionals, landowners and self-employed people. NCB holds more than €1 billion in assets on behalf of this "influential investor cohort", who tend to be aged at least 45.

The results of the survey show that the typical wealthy investor places 55 per cent of his or her portfolio in property, 28 per cent in shares, 8 per cent in cash, 6 per cent in unquoted companies and 3 per cent in government or corporate bonds.

NCB puts the relatively high cash weighting down to the "safety and accessibility" of deposits, while it judges that the holdings in unquoted companies are likely to represent high-quality, low-risk investments.

Some 15 per cent of respondents said they held between 80 and 100 per cent of their investment portfolio in property, with about a quarter dedicating between 60 and 80 per cent of their portfolios to bricks and mortar.

The average wealthy investor sees property as either being fairly valued or overvalued. No respondent to the study said they thought property was undervalued, although some saw overseas property as holding more investment potential.

Slightly more than half said they thought property was overvalued, with the remainder judging it to be of "fair value".

About half were planning to raise the proportion of assets they held in property.

They cited "market performance" as the main driver behind their decision to invest in property above other asset types.

Tax breaks such as section 23 relief were seen as a relatively inconsequential factor in the decision to invest in property, with low interest rates considered to be slightly more important.

Within their property portfolios, prosperous investors' homes account for about 42 per cent of their holdings in the class, with residential investments accounting for a further 20 per cent. Investments in office, retail or industrial properties comprise 27 per cent of the average property portfolio.

The vast bulk of property assets held by affluent Irish investors are located in the Republic, with the UK accounting for 16 per cent. Continental Europe as a whole has attracted just 5 per cent of the funds the group dedicates to property, with the newest EU states well represented within this.

Two-thirds of the investors said they thought their weighting in property was "about right", with 17 per cent describing themselves as "underweight" in the class.

The average wealthy investor funds about 17 per cent of their overall investment portfolio by borrowing, with most of these loans thought to be linked to property. When respondents who had no borrowings are excluded from the results, the ratio of debt to overall investments rises to 27 per cent.