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News from Knight Frank Hong Kong

Knight Frank launches The Wealth Report 2019 (13th edition)

06 March 2019

 Wealth distribution

The Wealth Report 2019 (Page 13)

Ultra-wealthy population (those with net assets of US$30 million or more)

·         The number of ultra-wealthy people is predicted to increase by 22% in the five years to 2023, taking the global population to nearly 250,000.

·         Asian markets will see the third biggest growth in UHNWIs over the next five years (2018-2023). India leads with 39% growth, followed by the Philippines (38%) and the Chinese Mainland (35%). Of the 59 markets in Knight Frank’s forecasts, eight of the top ten markets ranked by future growth are in Asia. However, it is worth noting that some of these markets are starting from a low base, for example, the Philippines is forecast to have 296 UHNWIs by 2023, a number that is less than 2% of the ultra-wealthy population of Japan (20,570).

·         In 2018, Japan leads in Asia with 18,534 ultra-wealthy individuals, follow by 9,953 on the Chinese Mainland, 3,598 in Singapore, and 3,010 in Hong Kong.

Nicholas Holt, Head of Research, Knight Frank Asia Pacific, says, “Despite softening momentum in the region’s economies, growth prospects in Asia remain favourable in the medium term. While China’s economy is expected to slow, emerging markets such as India and the Philippines will deliver some of the strongest growth over the coming years.”

Though the forecast for long-term wealth creation remains positive, UHNWIs in Asia-Pacific are less optimistic about growing their wealth in 2019, according to the Attitudes Survey. Against the prospect of continued higher interest rates and with the ongoing Sino-US trade dispute, wealth advisors in Asia (excluding Australia and New Zealand) were among the least optimistic globally about their clients’ ability to create wealth in 2019.

“The uncertainty around US-China trade tensions, a Chinese economic slowdown and Brexit have all dampened regional sentiment for the next twelve months. While a deterioration in any of these situations could further impact sentiment, Asia remains one of the key growth engines of the world economy,” says Holt.

Thomas Lam, Executive Director and Head of Valuation & Advisory says, “Despite the continued cooling measures in the property market, the supply of super luxury homes in Hong Kong remains limited and the super luxury prices continue to increase, surpassing the growth rate of mass residential prices. In Hong Kong, US$1 million would buy 22 square metres of prime property. At the same time, according to Knight Frank's Wealth Report, the number of Hong Kong's UHNWI’s rose by 22% between 2013 and 2018, the population is projected to rise by 27% over the next five years from 2018 to 2023. All of the above factors support Hong Kong's major transactions on the rise. The increase in trading volume was the most significant increase in transactions with property prices exceeding HK$100 million. In 2018, the number of such transactions increased by over 30% year on year.”

Regional Wealth Distribution

Region

Ultra-wealthy (US$30m+)

% change

2013

2017

2018

2023

2013 - 2018

2017 -2018

2018-2023

Africa

1,868

1,991

2,050

2,450

10%

3%

20%

Asia

40,853

46,661

48,245

59,116

18%

3%

23%

Australasia

3,828

4,230

4,400

5,360

15%

4%

22%

Europe

58,731

67,867

70,627

87,400

20%

4%

24%

Latin America

9,677

10,077

10,457

12,676

8%

4%

21%

Middle East

7,052

8,019

8,301

9,997

18%

4%

20%

North America

43,626

50,184

51,912

61,119

19%

3%

18%

Russia & CIS

2,034

2,222

2,350

2,935

16%

6%

25%

World

167,669

191,251

198,342

241,053

18%

4%

22%

Source: Globaldata Wealthinsight, the Wealth Report 2019 Page 86

 

Market level wealth distribution of ultra-wealthy (US$30m+) growth – Top 15 Markets ranked by growth over the next 5 years

 

 

Market

 

2013

2017

2018

2023

  2013 -2018

 2017-2018

2018-2023

1

India

1,576

1,827

1,947

2,697

24%

7%

39%

2

Philippines

171

204

215

296

26%

5%

38%

3

Chinese Mainland

7,905

9,487

9,953

13,429

26%

5%

35%

4

Indonesia

626

719

756

995

21%

5%

32%

5

Vietnam

110

135

142

186

29%

5%

31%

5

Malaysia

557

611

636

830

14%

4%

31%

7

South Korea

1,565

1,803

1,893

2,456

21%

5%

30%

8

Romania

172

204

215

278

25%

5%

29%

8

Thailand

527

600

631

814

20%

5%

29%

8

Poland

487

563

589

757

21%

5%

29%

11

Germany

11,392

13,401

14,047

17,854

23%

5%

27%

11

Hong Kong

2,469

2,880

3,010

3,821

22%

5%

27%

11

Spain

3,475

3,926

4,111

5,202

18%

5%

27%

14

New Zealand

1,050

1,235

1,292

1,629

23%

5%

26%

15

Taiwan

1,503

1,712

1,781

2,233

18%

4%

25%

Source: Globaldata Wealthinsight, the Wealth Report 2019 Page 86

 


Wealth distribution of ultra-wealthy (US$30m+) – Top 10 Markets in Asia

 

 

Markets

2018

2018-2023

1

Japan

18,534

11%

2

Chinese Mainland

9,953

35%

3

Singapore

3,598

22%

4

Hong Kong

3,010

27%

5

India

1,947

39%

6

South Korea

1,893

30%

7

Taiwan

1,781

25%

8

Indonesia

756

32%

9

Malaysia

636

31%

10

Thailand

631

29%

Source: Globaldata Wealthinsight, the Wealth Report 2019 Page 86

 

 

The Knight Frank City Wealth Index

Source: The Wealth Report 2019, Page 19

Cities that matters to the wealthy

  • The Knight Frank City Wealth Index is built around three categories: wealth, investment and lifestyle.
  • On all measures, London has topped the table in the 2018 City Wealth Index, London has topped the 2019 City Wealth Index, reclaiming the spot from New York, which dominated last year’s standings. New York slips to second and the top five is completed by Hong Kong, Singapore, Los Angeles. Hong Kong ranks 3rd overall in the index.
  • Asia’s growing prominence is confirmed. Overall, the number of slots in our top 20 occupied by cities in the Asia-Pacific region rises to seven.

Knight Frank City Wealth Index 2019

 

Overall rank

City

Wealth

Investment

Lifestyle

1

London

1

2

1

2

New York

1

1

3

3

Hong Kong

3

3

4

4

Singapore

5

9

1

5

Los Angeles

13

3

13

6

Chicago

19

8

7

7

Shanghai

8

23

15

8

Sydney

27

6

16

9

Tokyo

28

19

5

10

Toronto

18

18

19

11

Paris

10

42

6

11

Berlin

34

12

12

11

Frankfurt

6

17

35

14

Beijing

3

37

20

14

Seoul

7

35

18

14

San Francisco

29

23

8

17

Munich

10

20

34

17

Washington

50

5

9

19

Atlanta

21

10

37

20

Amsterdam

48

14

10

Source: Knight Frank Research, Wealth Insights, RCA, Five Star Alliance, Michelin, Times Higher Education, The Economist


Attitudes Survey

Source: The Wealth Report 2019, Page 88

 

The 2019 Attitudes Survey is based on responses provided by 600 private bankers and wealth advisers who between them manage over US$3 trillion of wealth for UHNWI clients.

Current allocation to property

According to the Attitudes Survey, real estate makes up 23% of UHNWI portfolios in Asia, higher than the global average of 21%. When asked “what percentage of your clients’ total wealth is allocated to the properties they live in (first and second homes)?” Chinese Mainland ranked highest in Asia at 50%. Indonesia ranked lowest at 18%.

Liam Bailey, Global Head of Research at Knight Frank says, “We have noted in previous years a growing desire from UHNWIs to increase the share of their portfolios dedicated to property. This trend has been confirmed by the growth in the average number of homes owned by wealthy people globally, increasing from 2.9 to 3.6 over the past year.” 

 

 

Market

Allocation of first and second homes in investment portfolio

 

Chinese Mainland

50%

South Korea

47%

Hong Kong

43%

Philippines

40%

Taiwan

38%

Malaysia

37%

India

29%

Singapore

29%

Indonesia

18%

Source: The Wealth Report Attitudes Survey 2019

 


The number of first and second homes

 

 

Market

The number of first and second homes on average

 

Taiwan

5.36

Indonesia

5.33

Chinese Mainland

4.12

Hong Kong

4.05

Philippines

3.94

Singapore

3.86

Malaysia

3.78

India

3.64

 

Source: The Wealth Report Attitudes Survey 2019

 

 

Percentage of clients with domestic property investments in 2018 (excluding first and second homes)

 

Percentage of clients with international property investments in 2018 (excluding first and second homes)

Philippines

48%

 

Hong Kong

32%

Malaysia

42%

 

Malaysia

28%

South Korea

38%

 

South Korea

28%

Taiwan

38%

 

Chinese Mainland

26%

Chinese Mainland

36%

 

Singapore

25%

Hong Kong

25%

 

Philippines

22%

Singapore

25%

 

Indonesia

15%

Indonesia

19%

 

Taiwan

15%

India

18%

 

India

14%

Source: The Wealth Report Attitudes Survey 2019

 

According to the Wealth Report Attitudes Survey 2019, Hong Kong buyers are most likely to invest in the UK (55%), Australia (30%), Singapore (25%), the US (25%), and Canada (20%). 

 

Prime Residential Property

Prime International Residential Index (PIRI)

 

Source: The Wealth Report 2019, Page 30 - 31

This year, the PIRI tracks the movement in the price of luxury homes in 100 key locations worldwide. The index highlights the many factors playing out around the world that affect prime property markets. 

Overall PIRI performance:

·      In 2018, the overall index increased by 1.3%, compared with the 2.1% in 2017, and the Index’s lowest rate of annual growth since 2012.

·      Of the 100 locations tracked by PIRI, over 70% recorded flat or rising prices in 2018. Only 5 locations recorded double-digit growth, comparing 11 locations last year.

·      Manila in Philippines leads the rankings (+11.1%), following by Edinburgh (+10.6%) and Berlin (+10.5%) on the second and third position.

·      Hong Kong has dropped from 17th to 47th place in the index, recording 1.8% prices growth yearon year.  While Guangzhou has dropped from the first place to 39th with only 2.3% price growth.

Knight Frank Prime International Residential Index (PIRI 100)- Annual change in prime prices

 

No.

Location

Annual % change

(Dec 17 - Dec 18)

 
 

1

Manila

11.1%

 

2

Edinburgh

10.6%

 

3

Berlin

10.5%

 

4

Munich

10.0%

 

5

Buenos Aires

10.0%

 

6

Mexico City

9.5%

 

7

Singapore

9.1%

 

8

Boston

8.6%

 

9

Madrid

8.1%

 

10

San Francisco

7.8%

 

11

Tokyo

6.8%

 

12

Jersey

6.5%

 

13

Barcelona

6.5%

 

14

Toronto

6.3%

 

15

Seattle

6.1%

 

16

Lisbon

6.0%

 

17

Algarve

6.0%

 

18

Chamonix

6.0%

 

19

Paris

5.3%

 

20

Frankfurt

5.1%

 

Sources: All data comes from Knight Frank’s global network with the exception of: Tokyo (Ken Corporation); São Paulo and Rio de Janeiro (Fundação Instituto de Pesquisas Econômicas); Oslo (Torbjørn Ek); Chicago, Los Angeles, Miami, New York, San Francisco, Seattle and Washington DC (S&P CoreLogic Case-Shiller); Barcelona (Ministerio de Fomento); Jersey (States of Jersey); Berlin and Frankfurt (ImmobilienScout 24); Toronto (Toronto Real Estate Board); Mexico (Sociedad Hipotecaria Federal); Stockholm (Svensk Mäklarstatistik AB).

 

Notes: All price changes in local currencies. Data for Cyprus relates to the period June 2017 to June 2018. Data for Barcelona and Jersey relates to the period September 2017 to September 2018. Data for Chicago, Los Angeles, Miami, New York, San Francisco, Seattle and Washington DC relates to the period October 2017 to October 2018. Data for Abu Dhabi, Berlin, Doha, Dubai, Frankfurt, Rio de Janeiro, Riyadh, São Paulo, Toronto and Vancouver relates to the period November 2017 to November 2018. Data for Stockholm relates to the period 1 January 2018 to 5 December 2018. Price change for Tokyo relates to properties above ¥100m.

 

Data for Boston relates to downtown condominiums. Data for Buenos Aires relates to new-build properties only.

Hong Kong’s luxury homes remain the second most expensive in the world

Source: The Wealth Report 2019, Page 34

Monaco - for the 12nd consecutive year – is confirmed as the most expensive city to buy luxury residential property, with US$1 million buying just 16 square metres of accommodation. Not far behind, Hong Kong, New York and London occupying second and third. US$1 million would buy 22 and 31 square metres, respectively.

RELATIVE VALUES: How many square metres of prime property US$1 million buys across the world

City

Square Metres

Monaco

16

Hong Kong

22

New York

31

London

31

Singapore

36

Los Angeles

39

Geneva

41

Paris

46

Sydney

52

Shanghai

57

Beijing

67

Tokyo

67

Berlin

73

Miami

93

Melbourne

97

Mumbai

100

Istanbul

109

Dubai

143

Cape Town

177

Sao Paulo

200

Source: Knight Frank Research, Douglas Elliman, Ken Corporation.

All data Q4 2018 based on exchange rate on 31 Dec 2018

Prime residential price forecast 2019

                                                                                                      

No.

City

Forecast

1

Madrid

6%

2

Berlin

6%

3

Paris

6%

4

Cape Town

6%

5

Miami

5%

6

Monaco

4%

7

Vancouver

3%

8

Sydney

2%

9

Los Angeles

2%

10

Geneva

1%

11

Melbourne

1%

12

London

1%

13

Auckland

1%

14

Singapore

0%

15

New York

0%

16

Dubai

-2%

17

Shanghai

-3%

18

Mumbai

-5%

19

Buenos Aires

-5%

20

Hong Kong

-10%

Source: Knight Frank Research, The Wealth Report 2019 (Page 55)

 

Looking forward, Hong Kong is expected to see prime residential flat prices to drop by 10% in 2019 and stabilise gradually, while the super luxury residential prices is expected to correct by 0% to -5% in 2019.

Real Estate Investment

Source: The Wealth Report 2019, Page 47

 

Local and cross-border invested volumes (12 months to Q3 2018)

 

No.

Destination Market

Investment Volume

1

US

US$414bn

2

UK

US$76bn

3

Germany

US$69bn

4

France

US$44bn

5

Chinese Mainland

US$32bn

6

Japan

US$31bn

7

Hong Kong

US$28bn

8

Australia

US$27bn

9

South Korea

US$23bn

10

Netherlands

US$21bn

Source: RCA

The most popular types of investment by investment volumes (12 months to Q3 2018)

No.

Property Type

Investment Volume

1

Office

US$330bn

2

Apartment

US$202bn

3

Retail

US$153bn

4

Industrial

US$140bn

5

Hotel

US$62bn

6

Senior Housing & Care

US$20bn

Source: RCA

 

Private capital investment local and cross border investment (12 months to Q3 2018)

No.

Destination Market

Investment Volume

1

US

US$178bn

2

UK

US$13bn

3

Hong Kong

US$12bn

4

Germany

US$11bn

5

France

US$9bn

Source: RCA

 

The most popular types of investment for private capital by investment volumes (12 months to Q3 2018)

No.

Property Type

Proportion

1

Apartment

35%

2

Office

29%

3

Retail

15%

4

Industrial & logistics

11%

5

Hotel

8%

6

Senior Housing & Care

2%

Source: RCA

Thomas Lam, Executive Director and Head of Valuation & Advisory, says: “Hong Kong ranks the 3rd in the world in terms of attracting cross border and domestic private capital investment, just after the US and UK. This outstanding ranking reinforces the city's leading position in attracting global private wealth.”

David Ji, Director and Head of Research & Consultancy, Greater China, says: “In terms of private wealth investment on the Chinese Mainland, cross border money only takes 16% of this market segment, ranked only 12th globally. So there is some effort to be made to make the Mainland market more attractive to overseas private wealth.”

To download the report, please visit:

http://www.knightfrank.com/wealthreport