The amount of private wealth generated in Asia is increasing in tandem with the region’s rapid economic growth and this is leading to huge demand for everything from Alba white truffles to Malaysian durians. But Asian HNWIs are more than just voracious consumers. They are also savvy investors who see huge potential in prime global property.
Asians love property. In October 2012 the Economist Intelligence Unit surveyed 160 private bankers around the world on the outlook for their industry and various asset classes. In Asia, respondents expected demand for property to outstrip other assets. One banker noted that investors in Asia are keen on property no matter what the state of the economy.
However, there are two reasons to believe that over the next decade Asian HNWIs will become relatively more interested in overseas properties. First, portfolio diversification. Asian investors are increasingly concerned with macro risks to their domestic economies, after several years of stellar growth. These include political issues – such as the standoff between China and Japan over the Diaoyu/Senkaku islands – and policy risks, like further cooling measures triggering a property price correction in cities such as Hong Kong and Singapore.
The second reason is growing comfort levels. As more Asian companies expand abroad, so owners and senior managers are becoming more familiar with foreign cultures and business practices, moderating the risk premium hitherto attached to these markets and asset classes.
So, which nationalities are most likely to venture abroad? In addition to Chinese investors, the next decade will likely see more investors from emerging markets such as India, Indonesia, Mongolia, the Philippines and Vietnam. Expect HNWIs from frontier markets like Myanmar and Sri Lanka to become more prominent as they seek safe havens for their newfound wealth to mitigate the risk of renewed political tensions at home.
And where might Asian HNWIs invest? In destinations with adequate liquidity, transparency, and an existing Asian population, such as London, Melbourne, New York, San Francisco, Sydney and Vancouver. There will be opportunities in emerging markets where Asian firms are doing more business, including Brazil, the Middle East, Russia, South Africa and Turkey.
And more will venture out of the cities to rural and beachfront properties,
driven by a desire for vacation homes and by perceived value.