Billionaires Have Growing Appetite for Real Estate As Market Slows

While the world’s wealthiest people earn their money in a variety of ways, many add to their fortunes through investing in real estate, which typically appreciates in value.

Tesla Inc. and SpaceX CEO Elon Musk, the world’s richest man, made his fortune starting and selling technology companies. He spent a decade buying six houses on two streets in Los Angeles and a house in Northern California, driving up the price of real estate in those neighborhoods.

Jeff Bezos started Amazon.com Inc. as a book-selling platform that grew into an e-commerce behemoth with a market capitalization of more than $1 trillion. Bezos now backs Arrived Homes, a real estate investment platform that acquires single-family homes to use as rental properties.

Now that the real estate market shows signs of softening, the world’s wealthiest are taking advantage of favorable pricing. For the last few years, the real estate market was cutthroat, with homebuyers often offering tens of thousands of dollars above the asking price.

Market Shift

The number of homes selling above the list price dropped 14.2% between August 2021 and the same month this year, making purchasing real estate a more attractive prospect for the wealthy.

Bezos is buying more real estate for his personal use with the $78 million purchase of a 14-acre estate on the island of Maui in Hawaii. He bought the compound from energy magnate DoughSchatz, who paid $1.2 million for it in 1996 and spent millions upgrading it.

Billionaire Larry Ellison, who co-founded the software giant Oracle Corp., paid $173 million to buy a 22-acre compound in Florida — the largest residential real estate sale ever closed in the Sunshine State.

Ellison, ranked the world’s eighth-wealthiest person by Forbes, also is adding to his commercial real estate portfolio. He bought a 16-acre Hyatt resort in Lake Tahoe’s Incline Village area for $345 million and paid $36 million for the Cal Neva Lodge on the lake’s North Shore. He reportedly owns a 7.6-acre compound near his newly acquired hotels.

So why do the richest people in the world continue to snap up real estate? For one, investing in real estate is a great way to preserve wealth — property tends to appreciate in value, and land can be pledged to secure financing or passed to an heir with little or no penalty.

Investing in real estate also allows wealthy people to maximize their tax breaks because the federal government gives property owners a credit on their mortgage expenses and property taxes paid. The tax benefits result in real estate investors often paying fewer taxes overall even though they’re bringing in more income.