Growing prosperity in Asia is having a spin-off effect on European and U.S. property markets as the new millionaires from emerging economies look to park their wealth in key cities in the developed world.
Asia has an estimated 43,000 ultra high-net-worth individuals with a combined wealth of $6.2 trillion, according to an estimate from Wealth-X, a company headquartered in Singapore that keeps tabs on individuals with more than $30 million in assets.
According to Wealth-X CEO Mykolas Rambus, a lot of Asia’s wealth is flowing to Europe and America, supporting real-estate prices in those continents’ prime locations.
The family of Hong Kong billionaire Cheng Yu-Tung, who owns the Chow Tai Fook conglomerate, with stakes in real estate, jewelry and hotels, recently purchased five luxury properties for $570 million in the U.S. in 2011, Rambus told CNBC.
Wang Hung, chairman of the Golden Eagle Retail Group, lives in Taiwan but has homes in California worth a combined $14 million. In London, buyers from Singapore, Hong Kong and Malaysia make up some 40 percent of the British capital’s apartment market, according to property consultants Jones Lang LaSalle.
“Some property agents in Singapore have indicated that sales of London properties to buyers in Singapore have often exceeded their local property business,” says Amar Gill, Head of Thematic Research at the Asia-Pacific brokerage CLSA.
While they continue to buy up real estate in their home countries, Asian high rollers are attracted to Western cities for their economic openness, the upside of their apartment markets, and, not least, their appeal as places to live or visit. These qualities put London and New York ahead of Hong Kong, Singapore, or even booming Shanghai and Beijing, according to a survey completed recently by Citi
and the international real-estate firm Knight Frank.
The survey shows that up to a third of prime market sales in Manhattan are now going to foreign buyers. Miami also saw double-digit growth in prime property values in 2011, thanks to capital flight from emerging economies.
Besides their favorable economic and cultural climates, Western cities are a bargain for Asian investors right now. “The historic highs of Asian currencies against the pound, euro and dollar make the timing attractive,” says Alistair Meadows, head of the International Capital Group, Asia Pacific at Jones Lang LaSalle.
The differential in currencies comes as Western property markets are working their way out of the doldrums. “These markets are still down 20-40 percent from 2007 levels,” notes Meadows.
Though late to the game, Chinese investors are now among the biggest players, Jonathan Miller, head of New York property analyst Miller Samuel, told Knight Frank. “The Chinese market opened up rapidly in 2011, with buyers from there joining other wealthy investors in targeting the $1 t0 $3 million Manhattan market,” says in the report.
Uncertainty in the Asian market is no small part of the sudden popularity of real estate in the West. Asian investors have come to the conclusion that equities and financial products are extremely risky and they have reverted to storing their wealth in “brick and mortar.”
Says Amar Gill of CLSA, “Rather than diversifying into other [kinds of] assets, the diversification they have pursued has been geographical.”