Political Risk and Luxury Real Estate: How HNWIs Allocate Capital in Times of Instability

In an era marked by geopolitical tensions, regulatory shifts, and economic volatility, high-net-worth individuals (HNWIs) are increasingly turning to luxury real estate as a cornerstone of their investment strategies. From 2023 to 2025, data reveals a pronounced shift in capital allocation toward tangible assets, with luxury property investments accounting for up to 32% of HNWI portfolios, according to a 2025 luxury real estate report. This trend is driven by the dual imperatives of wealth preservation and strategic diversification, as investors seek to hedge against the risks of political instability and currency devaluation.

The Rise of Luxury Real Estate as a Safe Haven

Luxury real estate has emerged as a preferred asset class due to its tangible nature, long-term appreciation potential, and utility as a gateway to residency or citizenship. For instance, 19% of HNWIs and 22% of ultra-HNWIs planned to invest in luxury real estate in 2024, with many leveraging residency-by-investment (RBI) programs to secure alternative passports or visas, as noted in a LinkedIn analysis. Countries like Malta, Greece, and the UAE have capitalized on this demand. Malta's Permanent Residence Program, which requires a combination of real estate investment and financial contributions, offers access to the Schengen Zone, while Greece's Golden Visa program allows property purchases starting at €800,000 in prime locations; the LinkedIn piece highlights these programs and their appeal to international buyers.

The UAE, in particular, has become a magnet for HNWIs. Dubai's tax-free environment, absence of capital gains tax, and 10-year Golden Visa for property owners have fueled a 15% surge in luxury property sales in 2025 compared to 2024, with prime areas like Palm Jumeirah seeing 8% price increases, according to a UAE luxury real estate analysis. Developers such as Primo Capital Real Estate LLC have expanded their services to cater to this demand, offering off-plan investments in high-growth areas like Dubai's Business Bay, as described in a Primo Capital press release.

Geopolitical Risks and Strategic Adaptation

While luxury real estate is perceived as a stable asset, geopolitical risks such as trade barriers, regional conflicts, and regulatory changes continue to influence investment decisions. A 2024 Knight Frank report found that 62% of investors considered geopolitical risks a key factor in their strategies, leading to cautious behavior and delays in cross-border transactions; this is discussed in a Concreit analysis. For example, conflicts in the Middle East or prolonged tensions between major powers have historically caused dips in property values and rental demand in affected regions, a point covered by that analysis.

To mitigate these risks, HNWIs are adopting diversified strategies. In the Baltic region, INVL Baltic Real Estate reported a 3.19-fold increase in consolidated net profit for the first nine months of 2025, driven by properties in Vilnius Old Town that balance historical preservation with modernization, according to an INVL interim report. Similarly, investors are leveraging AI-powered geopolitical risk analytics to assess market vulnerabilities and optimize portfolios, as noted in the Concreit analysis.

Comparative Allocation: Real Estate vs. Equities and Commodities

HNWIs are increasingly favoring luxury real estate over equities and commodities during periods of instability. While equities and commodities can offer high returns, their volatility makes them less attractive in turbulent times. For example, Alexandria Real Estate Equities, Inc. (ARE), a life science REIT, saw significant institutional investment in 2025, as noted in a MarketBeat alert. Meanwhile, commodities like gold remain a secondary consideration, with investors allocating capital to real estate for its dual utility as both an asset and a lifestyle enhancement, a trend also referenced in the Primo Capital press release cited above.

McKinsey's analysis underscores this shift, noting that HNWIs are prioritizing real estate and equities over more speculative markets. The UAE's luxury market, for instance, has outperformed other asset classes, with branded residences-such as those developed in partnership with Ritz-Carlton or Bulgari-commanding 25-35% premiums due to their exclusivity and brand equity, as highlighted in the 2025 luxury real estate report referenced earlier.

Conclusion

As political instability persists, luxury real estate remains a resilient and strategic investment for HNWIs. Its ability to provide both financial returns and lifestyle benefits, coupled with its role in securing residency or citizenship, ensures its continued appeal. However, investors must remain vigilant, leveraging advanced risk analytics and diversification to navigate geopolitical uncertainties. The coming years will likely see further innovation in this space, with developers and governments tailoring programs to meet the evolving needs of global capital.