Covering everything from investment trends to the most expensive auctioned items, the 13th edition of The Wealth Report by Knight Frank includes all that interests, effects and drives the investment portfolio of the UHNIs.
By Anuradha Kaul
It is a busy day at the Knight Frank head office in Mumbai and the excitement in the air seems evident. It is the day when Knight Frank celebrates the launch of their marquee annual property of the year ‘Wealth Report 2019’, at a high-end closed door event amidst the presence of its global spokespersons and the who’s who of the UHNI guest-list.
As I wait to meet the spokespersons about the findings and global trends, let me first take you through some of the distinct key-findings of the Knight Frank Wealth Report 2019 that have stood out. Here they are…
Whisky beats Wine in India as top preference for passion investment Knight Frank Luxury:
The Wealth Report 2019 reveals that new entrant whisky has topped the Knight Frank Luxury Investment Index (KFLII), surging in value by 40% over the 12 months to Q4 2018. The Knight Frank Rare Whisky 100 Index, featured for the first time in the KFLII and compiled by Rare Whisky 101, contains 100 bottles of the world’s most desirable rare Scotch whisky. The index tracks actual UK auction prices of these bottles, finding that over the past ten years’ values have increased by almost 600%.
India leads global growth of Ultra High Net Worth Individuals:
Asia’s billionaire population growth is set to outpace other regions between 2018 and 2023. The number of billionaires from the region will rise by 27%, surpassing growth in North America (17%) and Europe (18%), reaching 1,003 in the next 4 years – more than a third of the world’s total billionaire population of 2,696.
However, this growth is at a slower pace compared with the last period measured from 2013 to 2018 when the number of billionaires in the region more than doubled from 363 to 787. India saw a rise of 116% in billionaire population between 2013 – 18 while the expected growth of 37% for the next five years (2018 – 2023) beats the global and the regional average
India’s wealthy prefer equity and bonds, while Asian UHNWIs prefer real estate, cash and gold:
According to the Attitudes Survey within the Knight Frank Wealth Report, 63% of survey respondents said the wealth of their ultra-high-net-worth individual (UHNWI) clients increased during 2018. Just over 20% reported no change, while 16% said it had fallen. The 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. In Asia, the numbers showed a slightly more subdued growth, with 58% reporting an increase, 23% recording a fall and 18% who said there had been no change.
Bengaluru to witness fastest growth of UHNWIs population globally by 2023:
The 13th edition of Knight Frank’s The Wealth Report 2019 provides global perspectives on prime property and wealth. The annual publication includes the Knight Frank City Wealth Index; price movements across 100 luxury residential property markets; the results of Knight Frank’s Luxury Investment Index; and, the Attitudes Survey. The report identifies top cities across the world that will support wealth creation including innovation indicators, wealth forecasts and economic growth and those aspects that improve a city’s growth prospects, such as infrastructure. Termed ‘Future Cities’ of the world, these cities demonstrate characteristics that will propel wealth creation as well as future property investment. Leading this table is the city of Bengaluru, which is expected to see a UHWNIs growth of 40% in the next five years.
Bengaluru is home to companies including Flipkart, Infosys and Wipro, and over 400 multinationals including Microsoft, Hitachi and Samsung have bases there. This is supported by the fact that the city has been grossing the country’s highest office absorption volume consecutively for the last 10 years and is expected to lead the office growth trend both in terms of investments as well as absorption.
Bengaluru has made a commitment to creating a knowledge economy by investing in education centres, including the Indian Institute of Management Bengaluru, the Institute of Science and the National Aerospace Laboratories.
The city’s broad ecosystem of innovation offers multiple opportunities for future growth, reflected in the rise of new age technology companies across sectors including artificial intelligence, food tech, fintech and robotics.
Mumbai’s is the world’s 12th most wealthy city; London takes top spot:
Hong Kong and Singapore took two of the top five spots in a global ranking of cities that considers wealth, investment and lifestyle. Hong Kong ranked third and Singapore fourth in Knight Frank’s City Wealth Index 2019, a list that investors rely on to identify global urban powerhouses. Mumbai ranked 12th in terms of wealth on the index bettering its previous position of 18th in 2017. While Bengaluru was placed 60th in terms of investments superseding Mumbai and Delhi. Other Asia-Pacific countries ranked in the top 10 include Shanghai, Sydney and Tokyo. Despite Brexit concerns, London took the number one spot overall, reclaiming the spot from New York, which dominated last year’s standings.
In the wealth category, Hong Kong and Beijing ranked third globally while Singapore took fifth place. In terms of investment, Hong Kong remains the top destination for private capital in Asia-Pacific. On lifestyle, Singapore beat New York and Hong Kong to share first place with London.
Indians prefer UK and US to buy properties outside of India:
Australia is the destination of choice for Asian Ultra-High-Net Worth Individuals (UHNWIs) who plan to buy a new home overseas or invest in property in the coming year, based on a Knight Frank survey of 600 private bankers and wealth advisers who between them manage over US$3 trillion of wealth for
UHNWI. On the other hand, for Indian UHNWIs, United Kingdom (UK) with 74% preferring to purchase in that country while 39% responded favourably to United States (US). Both these places are of high interest for the India ultra – rich from business as well as leisure and lifestyle purposes. These also remain the top choices of investment or self -use purchase for the coming years.
According to the Attitudes Survey in Knight Frank’s Wealth Report, 25% of Asian UHNWIs, plan to buy a home outside their country of residence by 2020, higher than the global average of 22%. 18% Indian UHNWIs showed affinity towards purchasing homes outside of their domicile country.
Of those, 45% indicated they would buy in Australia, 33% say UK and 32% chose Canada. These buyers are mostly from China, Hong Kong, Malaysia and South Korea, with one in three indicating their interest to buy a residential property overseas this year or next. Less than 1 in 20 in Australia and New Zealand plan to buy a home internationally, and 39% indicated they would buy in Australia, according to the survey responses from the wealth managers. Australasians largely prefer to buy in their home country rather than overseas.
Mumbai is 16th most expensive prime residential market in the world:
The Philippines’ capital city of Manila led the Knight Frank Prime International Residential Index (PIRI 100) after luxury home prices jumped 11% last year, bolstered by a lack of supply and a thriving domestic economy. However, Manila’s performance pales in comparison with the top growing residential markets of the past tracked by the index. In the 12 years that Knight Frank has monitored the value of 100 luxury residential markets, the best-performing city has yet to record annual growth below 21%. Mumbai (67 PIRI rank), which has the most expensive real estate in India, saw a marginal rise in prime real estate costs at 0.3% while Delhi recorded a rise of 1.4% putting it ahead of Mumbai at 55 th rank on the survey. Bengaluru recorded a rise of 1.1% rise in prime residential real estate in 2018 over previous year.
According to the report, the Indian Ultra-High Net-Worth Individuals (UNHWI – people with a net worth of over US$30 Million, excluding their primary residence) population has grown by 30% in the past five years, according to data from Global Data Wealth Insight. This totals to 1,947 UHNWIs, out of which 61% of expect their wealth to increase in 2019, showing confidence in the economic growth of the country.
Conversation with Nicholas Holt, Head of Research, Knight Frank Asia Pacific
My first meeting was with Nicholas Holt, Head of Research, Knight Frank Asia Pacific, who has been with Knight Frank since 2010, working in three different markets, Vietnam, Singapore and now Beijing. We begin by asking, having closely experienced these markets across Asia, in your perception, how are these markets in Asia similar or different? Holt points out, “They are all very distinctly different.” He adds, “For that matter, in India, every state is very different, and even various cities are also different from each other.” Further as the conversation turns towards the extent of indulgence in luxury in the Asian market, Holt tells us, “When we look at tastes and preferences, in China and India, investments in passion or luxury investment are making an exponential growth. They used to make hardly any part of the wealth portfolio (perhaps a 5%), but are now growing. This is perhaps due to the fact that the luxury asset classes have grown and performed. We have the Knight Frank Luxury Investment Index, which look at different luxury investment asset classes, and they have all performed pretty well.” These asset classes include – rare whisky, art, coins, Chinese ceramics, stamps, diamonds and gemstones, and high-end property. While a lot of these asset classes are passion driven investments, we ask about the trends focused upon in India. “The top line trend is that we are seeing India and China is seeing HNIs increasingly investing in passions. It usually starts with watches and jewellery, and to grow from there into investing in works of art, classic cars and there on into larger investments. This is a bit of a trend, on how investments in passion usually begin.” He further informed that the rare whisky have performed exceptionally well.
On being asked about the one trend that stood out for India, Holt says, “The one distinct trend is the fact that the philanthropic activities have seen a sudden increase, and have recorded a 45% increases in the year 2018. This percentage for India is way higher than the global trends for the same, and is an interesting point of observation.”
Conversation with Lord Andrew Hay, Global Head of Residential Division at Knight Frank
In my second meeting, I was left thoroughly impressed by Lord Andrew Hay, Global Head of Residential Division at Knight Frank. Our conversation hit off on accessing the global political environment and how it is affecting the wealth and investment scenario. Lord Andrew Hay interestingly explained a line-up of facts, starting with – “The whole world is in a turbulent state – elections here in India, UK being a bit unstable too, elections in Europe, bits of Europe into recession, and there is the China-US tension going on. So, there are some fascinating forces at play around the world, and yet wealth is still growing. What one must look at is that the past ten years have been about wealth creation, and we’ve had the JFC, and we’ve got the perception moving on the wealth preservation, and while the Western world has moved to that change of mentality, we’re seeing in the East this huge generation of wealth growth. There is a whole new breed of wealth creators who are gradually indulging in investments of passion and are going all out as they do. The question of affordability isn’t a point of concern for this generation of spenders in India are putting, in reference to investment into real estate segment, a price equivalent to the most prime real estate properties across the world, and that makes the changing and evolving market in India such an interesting focus point.” Telling us more about annual tradition of introducing The Wealth Report, Lord Andrew Hay says that, “Predicting what the next 12 months have in store for our clients has proved to be an interesting process. The multitude of global, political and economic concerns of the past few years are far from being resolved. They have rather increased and become more complex. And yet, we remain optimistic about the coming times. Beyond the world of real estate, the investments of passion have been showing signs of growth and interestingly so the trends seen in the segment are noteworthy.”
