BY Chris Prasad
Some trepidation is seeping into the property industry with news circulating that we could soon lose a sizeable portion of our Ultra High Nett Worth Individuals (UHNWI), who may be seeking to live in greener pastures on foreign shores.
Naturally, this will be a bitter pill for the market – and the economy as a whole – to swallow. In a turbulent financial climate, the last group you want to see jump the ship are those with the type of expendable wealth and purchasing power that can reinvigorate the economy.
However, the latest survey that suggests this is a plausible outcome is Knight Frank’s The Wealth Report 2016, where 26.3 per cent of the wealth advisors surveyed cited that their clients (Malaysia’s super rich) are considering permanently changing their domicile or country of residence over the next 10 years. This statistic is only second to China which registered 32.1 per cent.
It is important to note that the survey was conducted on bankers and wealth advisors, locally and globally, and not on the UHNWIs themselves. Knight Frank has clarified that the percentage is not in direct reference to the number of ultra-wealthy Malaysians looking to live abroad, as reported in a number of dailies this week.
However, it does indicate that a good portion is considering this option. More concern comes from the fact that the number of UHNWIs is shrinking in the country, slipping by some 15 per cent from 1,168 individuals to 993.
Knight Frank’s Asia Pacific head of research Nicholas Holt qualified that the “ultra rich” are defined as those with a minimum of US$30 million in investable assets, which means the weakening ringgit has pushed many local UHNWIs out of this bracket.
In reference to individuals looking to live overseas, he said a number of factors come into play.
“The major concern for many Asian UHNWIs is the global economy, with uncertainty over the slowdown in China, and a monetary tightening cycle in the United States that threatens wealth generation,” said Holt.
The top three concerns identified among Malaysians were succession and inheritance issues, the global economy and local taxes.
However, another explanation for why local UHNWIs are now looking abroad is simply that Malaysians are becoming increasingly international, said Knight Frank Malaysia managing director Sarkunan Subramaniam.
“Malaysian developers are going abroad to build residential properties in London, Sydney and Melbourne, which is also why Malaysians buy from them. We’re getting more international,” he said.
In fact, the report revealed that this trend was on the rise Asia-wide, with an overall 18.4 per cent of Asians citing that they are hoping to change their domicile over the next decade.
Despite the biggest slide in Malaysia’s super rich in recent times, the dip may be a temporary one, and other statistics from The Wealth Report suggest that there is no immediate cause for alarm.
For one, Knight Frank forecasts a 64 per cent growth in the population of Malaysian UHNWIs over the next decade, which is higher than the expected loss of super-rich individuals due to migration.
In fact, Asia tops the absolute increase of UHNWI population among the world’s regions, both in the last 10 years and the next 10 years to come.
“Looking at a longer time horizon, Asia especially has been fertile ground for the growth of UHNWIs, with more individuals surpassing the US$30 million barrier than any other region,” said Holt.
Globally, this population is expected to grow by 45 per cent by 2025, even though this rate is significantly slower than the previous decade.
Another bright note comes in the form of UHNWIs reaffirming that property remains crucial to their investment and wealth preservation plans. As wealth creation is expected to slow in the coming decade, the ultra-rich are on the lookout for new investment and wealth management strategies, but also safe havens.
In Malaysia, 65 per cent of the respondents said asset allocation to residential properties had increased in the last few years, while the same percentage said that this would continue to increase in the next 10 years.
This percentage represents the highest commitment to asset allocation in property among UHNWIs in the Asia-Pacific region.