Singapore is the second-most important destination in the world for Asian UHNWIs when it comes to real estate investment
Singapore is the second-most important destination in the world for Asian ultrahigh-net-worth individuals (UHNWIs) when it comes to real estate investments, according to the latest edition of Knight Frank’s Wealth Report 2017, released on March 1. The UK remains the top destination, followed by Singapore, Hong Kong, China and the US.
“The conducive business environment and clear regulatory framework here have augmented Singapore’s status among the wealthy as a preferred location to live and do business in,” says Alice Tan, head of research and consultancy at Knight Frank Singapore.
According to the report, expectations of rising interest rates have not dampened the appetite of the world’s ultra-wealthy when it comes to property investments in key global cities such as Singapore.
“Not only are a lot of UHNWIs heavily invested in property, they have also signalled their intentions to increase their investment allocations in property over the coming years,” says Nicholas Holt, head of research for Asia-Pacific at Knight Frank.
According to the report, Asia’s UHNWIs have allocated about 29% of their portfolios to real estate over the next two years, compared with the global average of 24%. “Amid the current backdrop of economic uncertainty, it did not come as a surprise that wealth preservation is now the most important factor when it comes to UHNWIs’ investment strategies,” Holt adds.
The two property segments that are highly sought after by the world’s UHNWIs are prime residential developments and commercial units, the report says.
“We see returning UHNWI interest in ultra-luxury properties here because our prices have reached a very attractive value proposition compared with Hong Kong, where the price of a prime residential unit can be double that of Singapore’s,” Tan notes.
“The prime residential areas favoured by UHNWIs are Nassim, Ardmore and Bishopsgate,” she adds.
Knight Frank categorises ultra-luxury residential properties as those with a minimum size of 2,500 sq ft and are located in prime residential districts 9 and 10. According to the real estate consultancy, the renewed interest in prime residential properties pushed up prices of ultra-luxury homes here by 3.4% to $3,000 psf in 2016, from $2,800 in 2015.
UHNWIs’ interest in Singapore real estate is not confined to prime residential developments; they are keen on strata-office properties as well. Take, for example, the recent acquisition of GSH Plaza by Fullshare Holdings, a Hong Kong-listed investment holding company controlled by mainland Chinese billionaire Ji Changqun.
Fullshare Holdings, which is engaged in property development, building, investment and healthcare services, paid $750 million for Plaza Ventures, the holding company that owns GSH Plaza. The deal values the building at $2,900 psf. According to Tan, UHNWIs view Singapore as a key business hub and the gateway city to Southeast Asia (SEA).
“We are seeing interest and enquiries from Chinese, Indian, Myanmar and Indonesian companies looking to establish their business base here, to gain access to the SEA market,” she says. “They are looking to buy strata-office space priced between $3 million and $10 million, or about $2,000 to $2,500 psf, and preferably freehold, to house their operations in.”
However, these individuals do not limit their search to freehold developments; they are also looking at 99-year leasehold projects with at least 60 years left on their lease, Tan adds. One such development is International Plaza in Tanjong Pagar.
“As competition heats up and the pace of property market changes accelerates in the region, the wealthy community [will be actively hunting] for safe havens with stable political climate such as Singapore to preserve their investments,” says Tan.