Since international global real estate consultancy and agency Knight Frank has compiled and issued The Wealth Report, it has been held up as its the go-to reference for property performance in the world’s most critical markets. Though the Report is completed with input from ultra high net worth individuals — truly the one percent — Nicholas Holt, head of research for Asia-Pacific at Knight Frank, is adamant there’s information to be gleaned for every investor at every level.
“Often what’s happening at the top of the wealth brackets you start to see in the lower wealth brackets,” says Holt. “A lot of Hong Kong and Singapore buyers that are buying in London are not multi-multi-millionaires. They’re buying in the sub-one million pound sector … [the Report] tends to be a good indicator of where the markets are going.”
Property remains the preferred asset class for investors, and wealth in emerging markets is underpinning the buoyancy of real estate globally. That said, spending on luxury goods and what the Report calls investments of passion (art, vintage cars, wine, jewellery — rare stamps in China and India) is expected to rise in 2014. All things considered, property is still where it’s at. So where is the cash going in the next year?
Heart In The East
According to Knight Frank, global wealth grew US$600 billion in 2013, and a great deal of that was in Asia, which will be the most active billionaire generator in the coming decade with 66 percent growth. Additionally individuals with US$30 million in net assets have increased by 59 percent since 2003, with the vast majority of those coming from emerging economies in the Middle East, Africa, Latin America and Asia. Not to be outdone, Hong Kong is predicted to see 37 percent more UHNWIs by 2023 and is set to usurp Singapore as the most crucial city in Asia by that time.
“The dominance of China is unavoidable and Hong Kong’s unofficial role as the portal between its big brother and the rest of the world will ensure the growing dominance of the city over the next decade,” explains Thomas Lam, Knight Frank’s head of research and consultancy for Greater China.
Asia-Pacific also reigns with regards to global prime property price growth, with many cities affected by 2008’s financial crisis on the road to recovery. Jakarta remains in the news for its stunning 38 percent growth in 2013, with Auckland (29 percent), Bali (22), Christchurch (21), Beijing (17) and Guangzhou (14) right behind it. And despite their unpredictable nature and assorted cooling measures, in an equity-driven market, Chinese Tier-1 cities, “are likely to see both demand and pricing continue to head higher,” says Holt.
The super rich got that way by making smart investments at the right time and for a host of reasons. There are, “different drivers in different countries with different stories happening, and there is a little bit of imitation … Education is a big one. Places like Melbourne and Sydney have seen significant amounts of Asian investors. A lot of it is just a family buying an apartment for their kids. There’s a reason people diversify,” theorises Holt. “In the 1990s there was a huge wave of Brits buying in Spain first, then in France. The pound was just so strong, and it would have been led by the ultra-rich buying in the south of France.”
Among the factors influencing where to invest are economics, quality of life, security and perceived power. London, New York and Hong Kong top the list in terms of economic activity; Washington DC, Beijing and Brussels top it for political influence. In the way the UK experienced a spike in enquires from the Middle East at the time of the Arab Spring in 2010, a similar spike is currently coming from the Ukraine.
Overall, Knight Frank’s survey determined that by 2024, the world’s most important cities will be London, New York, Hong Kong, Singapore, Shanghai, Beijing, Dubai, Miami, Geneva and Mumbai. Sitting on the horizon as burgeoning hot spots? Sao Paulo, Istanbul, Abu Dhabi, and, oddly, Sydney. Sydney is prime example of Asian investment money driving growth; Australia is second only to the UK for commercial and residential investment from Hong Kong, Singapore, Malaysia, China and India (74 percent).
Finally for the more risk-tolerant there is Africa, with its emergent business hubs, growing mobile connectivity and vast natural resources. Nairobi is, “the most important business centre between the Mediterranean and Johannesburg … International companies recognise there’s too much going on in Africa to run their entire operations out of South Africa,” states the Report. GDP is increasing (5.7 percent each year to 2018), the middle class is growing and infrastructure investment is up. South Africa, Kenya, Nigeria, Ghana and Zimbabwe are the continent’s bright lights if your politics don’t get in the way.
You can check out The Wealth Report online at www.thewealthreport.net.