Independent global property consultancy Knight Frank launched the 11th edition of The Wealth Report, incorporating the results of the Attitudes Survey which offers an annual window on the issues that are influencing ultra-high net worth individuals’ (UHNWI) investments and lifestyle decisions. This year’s survey results are based on responses from almost 900 of the world’s leading private bankers and wealth advisors, representing over 10,000 clients with a combined wealth of around US$2 trillion (RM8.76 trillion).
• Across the world, all survey respondents – except Hong Kong and India – singled out wealth preservation as the most important factor when it comes to the management of their wealth and investment decisions.
• According to the survey findings, portfolio liquidity – one of the 14 factors listed on the survey – emerged significantly higher in importance for Asian UHNWIs at 42% when compared to the global average of 27%; Hong Kong stood out remarkably high at 65%.
• Despite the rising popularity of impact investing, philanthropic outcomes were considered one of the least important considerations for both the respondents’ millennial clients and clients of an older generation. Comparatively between these two sets of clients, the latter were more concerned about philanthropy and being seen as a responsible global citizen; whilst capital growth is the bigger concern for the millennials.
Nicholas Holt, Head of Research for Asia Pacific, Knight Frank Asia Pacific, says, “Amidst a backdrop of economic uncertainty, it is not surprising that wealth preservation has been identified as the most important factor when it comes to UHNWI investment strategies. Real estate in liquid, secure, major global markets – that proves a hedge against inflation and provides long-term capital growth upside – continues to be a key target of many wealthy individuals throughout the world. Going forward, we expect the focus to increasingly be on the safety of capital rather than purely the size of returns.”
Sarkunan Subramaniam, Managing Director of Knight Frank Malaysia, highlights, “The attitude survey shows that more than half of the Malaysian respondents view the anticipation of capital control as one of the main threats for capital preservation of growth. This would be one of the main concerns of the Malaysian UHNWIs who are looking into growing and maintaining their wealth over the next five years. Other concerns include political uncertainties and potential falls in asset values.
79% of Malaysian respondents expressed their biggest concern on how they will pass their wealth to the next generation is the fear that their inheritance will by squandered or mismanaged by the next generation. More than a quarter 43% of Malaysian respondents feel that the next generation should earn their own money.”
Wealth portfolio: Real estate allocation
• Among investable asset classes*, real estate investments came top of the list for Asians’ wealth allocation at 29% compared to the global average of 24%.
• Among the Australian and South Korean UHNWIs, wealth allocation to primary residences and second homes emerged top at 24% and 25% respectively, notches above the 16% global average.
* Asset classes include: Investments (equities, bond, cash, precious metals, etc.); Real estate investments (excluding primary residence and second homes); Personal business; Primary residences and second homes; Collectables (art, cars, wine, etc.); and others.
• Survey respondents across the world stated that their clients typically own about three homes on average. Only Malaysia and Taiwan respondents stated four homes on average, alongside those from Saudi Arabia.
When asked in which overseas countries would your client most likely to own a home:
• Looking at the top 10 overseas destinations, Singapore emerged as the second most likely market for Asian UHNWIs to own overseas property, after the UK.
When asked what percentage of their clients were likely to buy residence over the next two years, domestically or overseas:
• Australia is the only market surveyed that is the most inclined towards the domestic market (31%) instead of purchasing overseas homes (12%).
• Conversely, respondents in China expressed the highest preference among the Asia-Pacific respondents for purchasing overseas homes (39%) versus buying locally (32%), showing that despite the increasingly stringently applied capital controls, there is still a sizeable appetite for overseas property from mainland Chinese buyers.
• Malaysian respondents demonstrated the second highest desire to purchase property globally, after Kenya – split fairly evenly between domestic (41%) and overseas (42%) property markets.
• The survey findings reflect Hong Kong as the market with the largest group of private wealth among UHNWIs across Asia-Pacific to have already invested in overseas commercial property.
• Conversely among the UHNWIs across Asia-Pacific, Australia is the market with the largest private wealth invested domestically on commercial property; Singapore, on the hand, is the least invested domestically.
• Globally, looking at sectors of interest in the commercial space, residential for investment has remarkably seen the highest drop in interest among the UHNWIs in Singapore, who cited office as the asset class most growing in interest.
• All markets globally cited residential for investment as the asset class most preferred for commercial investment – except India and Singapore alongside South Africa, Spain and Saudi Arabia respondents who cited office.
When asked in which overseas countries would your client most likely to invest in commercial property now or over the next few years:
• Looking at the top 10 overseas destinations, Singapore comes top for Asian UHNWIs looking to invest in commercial property, moderately ahead of the UK and the US.
Good schools are a key driver of the housing market and their presence often helps to push up local property prices, but UHNWIs from a growing number of countries are choosing to educate their children overseas.
• 38% of this year’s Attitudes Survey respondents with clients in Asia said wealthy families were becoming more likely to look abroad for a good school. For Malaysia, the figure was 72% – the highest of any country surveyed.
• Education for children is the second important factor among a list of eight criteria for UHNWIs across Asia choosing to buy somewhere to live. Similar to 2016’s survey findings, respondents in Malaysia rated this criterion the highest among the respondents in Asia- Pacific.
• Interestingly, on the global scale, personal security is rated the most important factor with a rating of 8.2 out of 10; India and Taiwan respondents rated this criterion exceptionally higher with a rating of 9.0 and 9.3 respectively.
Sarkunan Subramaniam, Managing Director of Knight Frank Malaysia highlights, “Our attitude survey reveals that Malaysia topped all Asian countries with education seen as one of the main reason affecting Malaysians’ decision in relocating. Among the Asian countries, Malaysia shows the highest amount of 72% respondents who intend to send their children overseas for education. This serves as ones of the key purpose that drives Malaysians to buying properties overseas.”
Judy Ong, Executive Director of Research and Consultancy, Knight Frank Malaysia, comments, “Wealthy Malaysians continue to look abroad for their children’s education and international work experience with Singapore, Australia and the United Kingdom topping their investment choice in overseas homes.”
• According to the Attitudes Survey, only 15% of UHNWIs globally use private aviation for the majority of their business and personal flights. However, the pattern varies widely around the world.
• Latin America’s wealthy residents, perhaps worried about the risk of kidnapping, are the biggest users, with 40% opting to go private. Just 4% of Australasian UHNWIs regularly choose to take a private jet, and in Asia their usage still lags behind the region’s rapid rise in wealth creation – only 9% of UHNWIs routinely travel on non-commercial flights.
“It wouldn’t be unusual for a firm with a turnover of US$50m to have its own plane,” confirms Hardy Sohanpal of international operator Global Jet Concept. Globally, however, private jet numbers are likely to rise as the desire to travel efficiently with maximum privacy becomes more of a priority for corporations and private individuals, says Mr Sohanpal. “The introduction of new apps and charter models that are competing to become the Uber of the airways is also likely to attract those who shuttle frequently between cities travelling first or business class.”
DISCLAIMER: The data above represents the findings of Knight Frank Research and is not in any form and endorsement or recommendation by iProperty.com. Readers are encouraged to seek independent advice prior to making any investments.