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UK still the top destination for residential & commercial property investment for most Asian UHNWIs

02 March 2016
  • Succession & inheritance issues top list of UHNWI concerns
  • Singapore’s ranked as India’s top overseas destination for commercial property investment 

Knight Frank, the independent global property consultancy, today launches the 10th edition of The Wealth Report, incorporating the Attitudes Survey conducted in conjunction with ultra-wealth intelligence consultancy Wealth-X.  This year’s survey is based on the views of around 400 of the world’s leading private bankers and wealth advisors who, between them, manage assets for about 45,000 ultra-high-net-worth individuals (UHNWIs) – those with $30m in assets or more – with a combined wealth of over half a trillion US dollars.  In the same survey, not only were the survey respondents asked about their views for the next 10 years, they were also asked to look back over the past decade. 

The majority of survey respondents (56%) across the globe singled out succession and inheritance issues as a major risk to wealth creation and preservation over the next 10 years. The state of the global economy (47%) and wealth taxes (50%) were also recognised as key concerns for the next decade.  These were also the top three concerns of the world’s UHNWIs over the last 10 years. 

Risks to wealth creation and preservation
Note: Data refer to percentage of respondents selecting each option

Rank

Risks

Past 10 years

Next 10 years

For Asian UHNWIs

Cited top concern

(past 10 years)

Cited top concern

(next 10 years)

1

Succession/inheritance issues

67%

56%

AU, CN, IN

IN, SG

2

Tax for the wealthy

62%

47%

-

-

3

Global economy

61%

50%

MY, TW

CN, HK, MY, TW

4

Legislation directly affecting the wealthy

55%

36%

-

-

5

Stock market volatility

51%

32%

HK, TW, SG

AU

6

Online security and privacy

39%

9%

-

-

7

Personal security and safety

34%

24%

-

-

8

Compliance issues

34%

12%

-

-

9

Personal and family health

33%

20%

-

-

10

Anti-money laundering initiatives

23%

4%

-

-

11

'Know your client' initiatives

19%

4%

-

-

12

The environment

14%

6%

-

-

Source: The Wealth Report 2016, Pg 10

 

Nicholas Holt, Head of Research for Asia Pacific, says, “The major concern for many Asian UHNWIs is the global economy, with the uncertainty around the slowdown in China, and a monetary tightening cycle in the US that undoubtedly threatens wealth generation. 

“Inheritance and succession issues are also seen as a big threat, as wealth preservation and transfer becomes an increasingly important issue which must be carefully navigated.”
 

Respondents  who think wealth creation will slow over the next 10 years

World region

% respondents

Middle East

47%

Russia & CIS

50%

Europe

54%

Africa

59%

Asia

62%

North America

68%

Australasia

84%

Latin America

100%

 

Source: The Wealth Report 2016 (Pg 10), The Wealth Report Attitudes Survey

 

 

Andrew Shirley, The Wealth Report Editor, says, “The results of this year’s Attitudes Survey highlight how important the next decade will be for UHNWIs and their advisors. Wealth creation is expected to slow, which, combined with an uncertain economic outlook around the world, will require new investment and wealth management strategies. However, judging by the sentiment of the survey’s respondents, property will remain an important part of UHNWI investment portfolios.

 “An increasing commitment to philanthropy and the growing involvement of women and the next generation in managing UHNW family wealth is an exciting and challenging development for those advisors who can adapt to the changing attitudes and aspirations of their clients.“
 

Proportion of total UHNWI wealth allocation

Investable wealth

Global average

Australasia

Asia

Financial investments (equities, bonds, etc)

28%

21%

25%

Primary residence and second homes

24%

30%

26%

Personal businesses

19%

11%

16%

Cash

15%

19%

20%

Real estate investments

11%

16%

9%

Collectibles (art, wine, cars, etc)

2%

2%

2%

Precious metals (gold, etc)

1%

1%

2%

Source: The Wealth Report 2016 (Pg 13), The Wealth Report Attitudes Survey 

 

Among Asia Pacific UHNWIs, primary residence and second homes held a predominant proportion of their portfolio during the last 10 years; this is also the case over the next 10 years. Financial investments are a close second both for the last 10 years and the next 10 years.

 

Property investment

Residential

  • 54% of total respondents said their clients had increased their allocation to residential property over the last decade. 41% expected it to increase further over the next 10 years, with 29% of clients likely to consider a residential purchase in 2016 – the clients in Malaysia scored the highest at 39%, followed by the ones in Singapore at 33%. 

  • When asked what factors had been growing in importance as a reason for UHNWIs to buy residential property, the most popular (55% of respondents) was as an investment to sell in the future. Investment diversification (46%) and as a safe haven for funds (47%) also scored highly. The “as an investment to sell in the future” element was considered especially important by those respondents with clients in Asia (60%) and Australasia (74%).
     
  • For the clients currently looking at buying overseas, those based in China, Hong Kong, India and Singapore cited the UK as their top overseas destination to purchase residential properties.  The US was the top choice for those based in Australia and Taiwan.  The respondents in Malaysia opted for Australia as their preferred choice.
     
  • Better returns on property and better educational / employment opportunities for children were the top two propelling reasons why these clients had picked their top destination for residential investing. 

    Commercial
  • Interest in commercial property is also growing strongly, with 47% of all wealth advisors predicting an increased portfolio allocation by their clients over the next 10 years. Offices and hotels are predicted to remain the investments of choice, although warehousing and logistics could overtake shopping centres and high street retail, according to the survey.
     
  • Lack of experience was considered the main reason hindering more private investment into the sector; this was exceptionally so by those respondents with clients in Singapore where 75% said this was the main barrier.
     
  • The UK emerged as the top overseas destination to purchase commercial property over the last 10 years for clients based in China, Hong Kong, India and Singapore.  The Australian respondents cited the US whilst the Malaysian respondents picked AustraliaChina was top for the respondents in Taiwan. These choices remain the same over the next 10 years except for the respondents from Singapore and India.  The US has become the preferred choice for the Singaporean respondents.  For the Indian respondents, Singapore is now their top pick for investing in commercial property.

Alice Tan, Head of Consultancy & Research of Knight Frank Singapore, says, “Despite the recent moderation of prices and rents of Singapore commercial properties, we see a gradual rise in interest amongst the Singapore wealthy for non-residential segment, mainly targeting Singapore, the UK and Australia. With its specialised nature and different set of various factors to assess its investment potential, commercial property investment requires professional advice and brokerage, of which established property consultants can provide value-add services to UHNWIs to grow their property asset portfolio.”

 

Education

  • The top two reasons cited by the respondents in Asia on why their clients would consider moving abroad include quality of life/health, and their children's education. 

  • In the last decade, half of the Asian UHNWIs had expressed that they were more likely to send their children overseas for their education.  Indian UHNWIs were exceptionally so with 81% more likely to do so. 
     
  • Over the next 10 years, this trend will continue with half of the respondents expecting their Asian clients’ likelihood to send their children abroad for education to increase significantly; the Malaysian UHNWIs saw the highest at 77%. 

Sarah Harding, Head of Residential for Asia Pacific, says, “Despite a turbulent 2015 for the world’s wealthiest, the savvy investors will still continue to pursue the flight for the best investment opportunities globally. However, these investors are more cautious than ever, resulting in thorough analysis of costs, implications and risks before they commit.  The global arena for residential property is even more competitive with the cautious measures taken by the willing property investors.  Today, it is the best-in-class projects by well-known developers in key locations that will succeed. 

“It is not surprising that the UK, Australia and the US remain the top three choices as the destinations of choice for overseas residential properties; but it is the UK that continues to be the number one choice for investors based in China, Hong Kong, India and Singapore.  For the overseas buyers in the UK, mainland Chinese buyers tend to prefer the big developers like Berkeley, whereas Hong Kong and Singapore buyers look closely at a mix of factors including size of units, location and price point, irrespective of the developer.  Generally, this trend has not changed over the years.

“With a slowing domestic London market, we are also seeing a 20% to 30% increase over the last two months in the number of UK-based developers looking at suitable international strategies to market their developments outside of the UK.”

 

To download the report, please visit:
http://www.knightfrank.com/wealthreport


For further information, please contact:

Mr Nicholas Holt, Head of Research, Asia Pacific
nicholas.holt@asia.knightfrank.com +65 6429 3595 @nholtKF 

 

Ms Alice Tan, Head of Research & Consultancy, Singapore
alice.tan@sg.knightfrank.com +65 6228 6833 

 

Ms Rachel Loke, Head of Public Relations & Communications, Asia Pacific
rachel.loke@asia.knightfrank.com +65 6429 3587 @knightfrank 

 

Ms Lixia Liew, Manager, Marketing & Communications, Singapore
lixia.liew@sg.knightfrank.com +656228 7358

  

 

About Wealth-X 

Wealth-X is the global authority on wealth intelligence, providing sales, marketing, strategy and compliance solutions to clients in the financial services, luxury, not-for-profit and education sectors. Its award-winning research and thought leadership are regularly cited by the world’s media such as CNBC, Financial Times, Thomson Reuters and BBC. Wealth-X has more than 250 staff in 10 global centres, including Singapore, London and New York (www.wealthx.com).