Ultra-Rich Continues to Focus on Real Estate
Despite a gloomy economic outlook globally, wealth creation will remain constant this year and real estate buying will continue largely in Asia, especially among ultra-high-net-worth individuals (UHNWI).
With prospects for capital growth and rental yields, property remains a cornerstone of wealth portfolios for UHNWIs across the region, according to the Attitudes Survey launched in Knight Frank’s The Wealth Report 2019 last week.
UHNWIs are persons with over US$30 million (RM124.16 million) in net worth.
Most of the world’s ultra-rich population tend to congregate in world-class cities. London has the largest UHNWI population, with 4,944 ultra-rich residents as at end-2018, while Madrid and Munich are the two fastest-growing cities in Europe.
The survey showed that real estate makes up 23 per cent of UHNWI portfolios in Asia, higher than the global average of 21 per cent.
This year, about 28 per cent of the survey respondents in Asia said they would be increasing their exposure to property, 42 per cent would maintain the same allocation, while 20 per cent would decrease their exposure - showing some profit-taking in some markets.
Knight Frank Malaysia executive director for capital Markets, James Buckley, said: “There is a lower correlation between real estate and the public markets, thus property is well-positioned to weather downturns and is an opportunity to diversify and reduce volatility in the investor’s overall portfolio.
“We see Malaysians continuing to invest in real estate in 2019, particularly diversifying abroad where there is a wider amount of investment grade property available.”
The Attitudes Survey showed that 25 per cent of Asian UHNWIs plan to buy a house outside their country of residence by next year. Of those, 45 per cent indicated they would buy in Australia, 33 per cent in the United Kingdom and 32 per cent, Canada.
These would-be buyers are mostly from Malaysia, China, Hong Kong and South Korea, with one in three indicating their interest to buy a residential property overseas this year or next.
Knight Frank head of residential for Asia Pacific, Victoria Garrett, said the ultra-wealthy are becoming increasingly strategic in their destination choices, a natural response to global uncertainty and political upheavals.
“As a result, they are investing in additional homes in cities and countries where they see greater levels of stability. Australia continues to draw significant interest from both domestic and overseas buyers, ticking all the boxes not only for stability, but also lifestyle, education, wealth preservation and
capital growth,” she said.
REASONS FOR PURCHASE
According to Garrett, a key factor influencing Asian UHNWIs’ decision to purchase property overseas is education.
As many as six out of 10 Asian UHNWIs, notably those from Malaysia, China, Hong Kong, Indonesia and Taiwan, send their children abroad for higher education.
Among the wealth managers surveyed in Malaysia, 96 per cent of them expect the trend of sending children overseas for university education to continue.
Dominic Heaton-Watson, Knight Frank Malaysia associate director for international residential project marketing, said this trend has been strengthening for some time now.
He said Malaysian property buyers have long had an affinity with destinations, such as Melbourne, New York and London, with regards to the quality of education.
“Purchasing an overseas property in a city they know so well from personal experience tends to suggest that knowledge and familiarity, along with language, culture and a transparent legal system, play an important role in their decision.
“It makes a lot of sense to our Malaysia-based clients to purchase a house (a tangible asset) for their children’s use while studying in a global city. The truly savvy clients take a medium-to-long-term approach by make a purchase many years ahead of their children even starting their overseas education,” added Heaton-Watson.