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News from Knight Frank Hong Kong

Knight Frank launches The Wealth Report 2021 (15th edition)

01 March 2021
Now in its 15th year, The Wealth Report provides a unique global perspective on private wealth and prime property. The annual publication includes Knight Frank Wealth Sizing Model; price movements across 100 luxury residential property markets; results of the Attitudes Survey and the Knight Frank Luxury Investment Index.
 
Headlines from the report include:
Asia will see the fastest growth in UHNWIs over the next five years, 39% compared to the 27% global average.
China saw the largest increase in its UHNWI population in 2020 year-on-year (YOY), followed by the US and Japan.
In Hong Kong, the entry point for the principality’s branch of the top 1% is US$2.79 million (about HK$21.6 million), which is higher than many other leadings economies such as Australia, France, Germany, UK and Japan.
29% of Hong Kong UHNWIs are planning to buy a new home in 2021, a sharp increase from 21% in 2020.
Hong Kong prime residential prices recorded 6.9% drop in 2020, it remains the second most expensive to buy luxury residential in the world for the 14th consecutive year.
UK, Hong Kong, US, Australia and Japan are the top 5 destinations for Hong Kong UHNWIs for buying a new home.
Watches, Art and Jewellery are the most popular investments of passion among clients in Asia.

Wealth distribution
Source: The Wealth Report 2021, page 10
 
Ultra-wealthy population (those with a net worth of over US$30 million including primary residence)
 
According to Knight Frank’s forthcoming edition of The Wealth Report, the number of ultra-high-net-worth individuals (UHNWIs), those with US$30m or more, around the world is predicted to grow by 27% in the next five years to 2025 taking the population to 663,483. Over the same period, the number of millionaires globally is set to rise by 41%.
 
Knight Frank predicts that Asia is likely to see the largest rise in the number of UHNWIs with growth of 39%, led by Indonesia (67%) and India (63%).
Liam Bailey, Global Head of Research at Knight Frank says, “Asia will see the fastest growth in UHNWIs over the next five years, 39% compared to the 27% global average. By 2025, Asia will host 24% of all UHNWIs, up from 17% a decade earlier. The region is already home to more billionaires than any other (36% of the global total). Chinese Mainland is the key to this phenomenon with 246% UHNWIs forecast growth in very wealthy residents in the decade to 2025.”
 
Looking back at 2020, Knight Frank’s wealth sizing model reveals that the number of UHNWIs globally increased by 2.4%, one-third of the growth rate in 2019 bringing the total to more than 520,000. China saw the largest increase in its UHNWI population in 2020 YOY (9,594 additional UHNWIs) followed by the US (6,080) and Japan (1,199).
 
Martin Wong, Associate Director of Research & Consultancy, Greater China at Knight Frank says, “As the UHNWIs in Chinese Mainland, Hong Kong and Taiwan accounted for over 66% of all UHNWIs in Asia in 2020 and are expected to grow to 69% in 2025, the region will continue to be the growth engine for UHNWIs in Asia. We would see substantial growth in investment volume as UHNWIs become more experienced in diversifying their portfolios, especially in the post-Covid era when everyone is trying to compete for first-mover advantages. Office premises remain the most preferable property investments for UHNWIs in the Greater China region, followed by residential.” 
Using the Knight Frank Wealth Sizing Model, we reveal how deep your pockets need to be to join the wealthiest 1% in selected countries and territories. In Monaco, which has the world’s densest population of super rich. The entry point for the principality’s branch of the 1% is US$7.9 million. Hong Kong, in sixth place, is Asia’s second highest entry, with the level of wealth required being US$2.79 million.
 
Knight Frank’s Prime International Residential Index
Source: The Wealth Report 2021, page 32
 
The index, which tracks the movement of luxury residential prices in 100 cities and second home markets globally for the 12-months to the end of December 2020 also reveals:
Auckland leads the index of prime price growth at 18%
Asian cities occupy the next three rankings: Shenzhen (+13%), Seoul (+12%) and Manila (+10%)
Hong Kong prime prices recorded 6.9% drop in 2020, the biggest decline since 2008. It remains the second most expensive in the world for the 14th consecutive year. US$1 million would buy 23 square metres.
Ten of the 11 North American markets tracked in the index sit within the top 20 rankings.
In the UK, an eight-week Spring shutdown during the nation’s traditional peak selling season saw London (-4%) playing catch-up over the summer. Once the property market was allowed to resume, a release of pent up demand boosted by a welcome stamp duty holiday buoyed the market.
 
Maggie Lee, Senior Director, Head of Residential Agency says, despite the weak economy and pandemic situation in 2020, Hong Kong still recorded about 100 luxury residential transactions valued over HK$100 million, compared to 127 transactions in 2019. Luxury home buyers continue to seek bargain deals amid the downtrend. Given the persistently low interest rates environment and limited new supply, luxury residential demand from both investors and end-users will remain resilient. We expect the prime residential prices to remain stable in 2021.
Ryan Black, Director and Head of International Residential Sales, Knight Frank Hong Kong says, in Greater London, we expect prices to be broadly flat this year, with a forecast of 1% growth reflecting the greater resilience of the economy in the capital as support measures are unwounded. Beyond this year, we expect the UK to outperform due to affordability constraints in London as demand is pushed further into the regions.

The PIRI 100    
Luxury residential market performance, annual price change December 2019 to December 2020. All price changes are in local currency.
 
Attitude Survey:
In the middle of a global pandemic and the related economic crisis why should we be interested in the wealthy? Simply put if we are to understand market and asset performance then the wealthy form a central part of the story. The objective of The Wealth Report is to assess how the fortunes of UHNWIs are changing, where they spend time, what they invest in and what they are likely to do next.
Knight Frank has conducted an attitude survey with over 600 private bankers, wealth advisors, intermediaries and family offices who between them manage over US$3.3 trillion of wealth for UHNWI clients.
 
Key results:
Wealth creation:
50% said their clients’ wealth had increased in 2020. Those with North American clients were most optimistic with 73% citing an increase and a further 23% seeing stability. North America’s UHNWI population sits 4% higher than 2019. The regions which were seemingly able to control the Covid-19 pandemic best, Asia and Australasia, were the strongest performers with growth of 12% and 10% respectively in their UHNWI population.
In Hong Kong, 69% said their clients’ wealth remained the same in 2020, 23% said their wealth had increased.
  
Among the survey respondents who said their UHNWI clients’ wealth had increased, three key themes emerged as to why: diversification, equities and property.

Thomas Lam, Executive Director, Head of Valuation & Advisory says, “Despite Covid-19 pandemic, the wealth remained the same for 69% of Hong Kong UHNWIs in 2020, while 23% of them had wealth increase. There are 61% of Hong Kong UHNWIs who expect an increase in wealth in 2021 and 85% are most excited in new investment opportunities in the post-pandemic world, showing that COVID-19 has not changed Hong Kong’s fundamentals in attracting investment capital. Different to other property markets, Hong Kong residential property investors highly value transport links as the most important element in purchasing new homes, while providing the conditions to work-from-home or nearby has not added much potential value.”
 
Home buying:
26% of UHNWIs globally are planning to buy a new home in 2021, a sharp increase from the 21% revealed in 2020. This demand will help fuel price rises of up to 7% in key markets over the course of the year.
21% of UHNWIs from Hong Kong bought new homes in 2020, 29% planning to buy a new home in 2021.
If purchasing a new home, UK, Hong Kong, US, Australia and Japan are the top 5 destinations for Hong Kong UHNWIs. Transport links, Access to quality healthcare and leisure facilities are the key factors of consideration for HK clients when choosing a new home.

Knight Frank Luxury Investment Index (KFLII)
Source: The Wealth Report 2021, page 66
 
Key highlights:
Hermés handbags have, for the second year in a row, topped the Knight Frank Luxury Investment Index (KFLII) with prices up 17% in 2020, according to data supplied by Art Market Research (AMR).
Fine wine comes in second place in the KFLII. Following a year of consolidation, wine markets experienced strong growth in 2020, up 13% compared to a year earlier according to Wine Owners which pulls together the Fine Wine Icons Index. Unlike the global financial crisis, the wine market has held its nerve throughout the pandemic, merchants did not mark down prices and the market has been stable.
After a sluggish 2019 where the value of the HAGI Top Index – which Knight Frank uses to track the value of classic cars – fell by 7%, 2020 saw cars race back up to third place in KFLII with growth of 6%. Ferraris performed particularly strongly.
Unlike fine wine, the Knight Frank Whisky Index, compiled by Rare Whisky 101, lost some momentum in 2020, dropping by 3.5%.
The art market also didn’t fair quite so well with the auction tracking AMR All-Art Index dropping 11% in 2020. But with so many factors impacting the market, there was no single reason for the fall in average values.
The coloured diamond market was also somewhat stymied by the pandemic, prices remained flat as a consequence but this year could see a bounce.
 
Andrew Shirley, Editor of The Wealth Report at Knight Frank says, “The market for luxury collectables, which relies on the auction market for much of its profile, is clearly badly affected by the Covid-19 pandemic. But some sectors like handbags are weathering the storm better than higher-value assets like the top end of the art market where no painting sold for over US$100 million for the first time in number of years.”