China plays a leading role in the latest edition of The Wealth Report 2024 by Knight Frank, now in its 18th year of providing insights into the nexus of global wealth, luxury real estate, and investment trends.
This year’s edition highlights the resilience and strategic foresight of high-net-worth individuals (HNWIs) — defined in the report as someone with a net worth of $1 million or more — especially in the Chinese market, as they navigate the complexities of an economic backdrop marked by significant geopolitical and environmental shifts.
Following last year’s challenges, including rising interest rates that led to a 10% decline in the wealth of ultra-high-net-worth individuals (UHNWIs, defined as those with a net worth of $30 million or more), the report shows optimism in terms of wealth creation opportunities.
This outlook is based on a favorable interest rate outlook, the robust performance of economies such as the US, and equity market recovery.
Wealth creation hubs#
Knight Frank forecasts a 28.1% rise in the global population of wealthy individuals by 2028, below the preceding five-year rate of 44%. This underscores the potential drag of medium-term inflationary pressures on economic growth, deviating from robust trends observed in recent years.
The projection underscores Asia’s pivotal role in wealth generation, with anticipated leaps in the number of affluent individuals in India (50%), mainland China (47%), Malaysia (35%), and Indonesia (34%) in the years leading up to 2028.
This raises pivotal questions about the dynamics of wealth mobility and whether this burgeoning prosperity will remain anchored in high-growth economies or see an exodus of talent and capital to the likes of Europe, Australasia, or North America.
Hong Kong, Singapore vie for the newly affluent#
This surge positions Asia to potentially surpass North America as the world’s premier hub of ultra-wealth, and is likely to see competition between Hong Kong and Singapore intensify as domiciles.
Singapore has implemented tax incentives and a regulatory environment that are conducive to business. It is now home to over 1,100 family offices, managing assets upwards of $4 trillion, a significant leap from the 100 offices present less than a decade ago.
Hong Kong has long enjoyed the status of the region’s premier wealth center, boasting the fastest growth in assets under management in the five years leading up to 2022, when “the winds changed” and some wealthy individuals began moving funds to Singapore.
In response, Hong Kong introduced incentives targeting family offices and a residency program for investors parking at least HK$30 million ($3.8 million) in the city.
Eye on Asia-Pacific investment#
The Asia-Pacific investment landscape is shaped by the financial behaviors and trends emerging from China. Historically, Chinese investors have poured up to 70% of their savings into real estate, both at home and abroad.
The late 2010s saw the Chinese middle classes favoring small apartments and condominiums in Southeast Asia, while more affluent investors preferred Australia, the UK, and the US, owing to their stable returns and reputations as safe havens.
However, Chinese investment behavior has changed over recent years. A prolonged domestic property crisis coupled with economic deceleration has led to a more cautious approach to investment.
Data from 2023 reflect this conservative turn, China’s top 100 developers seeing sales shrink by 17.3% year on year amid a pervasive liquidity crunch. Attempts by the Chinese government to resuscitate the market, including easing interest rates and down payments, have yet to yield significant results.
These factors have produced a more discerning Chinese buyer. Destinations like Thailand and Malaysia have become less popular, while Japan and the UAE are seeing real estate acquisitions by Chinese investors increase.
Notably, Australia remains the top choice for Chinese property investment overseas. Yet, as Nikkei recently noted, Chinese nationals are also packing into the Thai property market, making some 60% of real estate purchases in Phuket in the first quarter of 2023, compared to 25% by Russians.
According to Waras Dechgitvigrom of Colliers, “To Chinese investors, the buy-to-let strategy, specifically catering to the Chinese tourism market, has emerged as a popular choice [in Thailand].”
Looking ahead#
Data from Knight Frank’s Wealth Sizing Model describes the expansion of UHNWIs across various regions.
The model forecasts a 47% increase in the population of UHNWIs in China from 2023 to 2028. This growth rate places China among the highest-ranking countries in terms of expanding affluent populations, second only to India in Asia.
China’s population of ultra-wealthy is set to expand from 98,551 UHNWIs in 2023 to 144,897 by 2028, cementing the nation’s status as a central hub for wealth accumulation. This growth is reflective of China’s burgeoning middle class, advancements in technology, and the expansion of industries that create significant new wealth.