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Surging Sentosa Golf Club membership price a sign of Asian private wealth’s influence in region’s real estate

South China Morning Post 23/01/2023 Nicholas Spiro

The dramatic increase in joining fees is indicative of Singapore's emergence as an international wealth hub
If this is any guide, Asian private wealth is set to become a more potent force in the region's property market in the coming years

Last year was a bloodbath in global markets. Every asset class, with the exception of commodities and the US dollar, took a beating. This year, a recession in parts of the world, including the United States, is a distinct possibility.

Yet, amid the wealth destruction, Sentosa Golf Club - Singapore's most prestigious golf course - has never had it so good. The cost for an expatriate to join the exclusive club has more than doubled since the eruption of the Covid-19 pandemic to S$840,000 (US$637,000). For citizens and permanent residents, the membership price has shot up to S$500,000, up 90 per cent since the end of 2019, according to Bloomberg data.

The dramatic increase is indicative of one of the most conspicuous trends in Asian finance: Singapore's emergence as an international wealth hub. According to data from Knight Frank, the number of ultra-high-net-worth individuals - those with at least US$30 million of net assets - in the city state surged 158 per cent between 2016 and 2021, to 4,206 and is set to rise a further 43 per cent by 2026.

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Family offices - set up by investment managers to administer the assets of rich families - have proliferated, rising from 200 in 2019 to 800 early last year. Singapore's political and economic stability, coupled with its neutral role in global affairs that allows it to serve as a financial centre for both Western and Chinese capital, has made it the "location of choice" for wealth management in Asia, a report by PwC published last September noted.

Many of the offices have been set up by mainland Chinese investors. The combination of the disruptions caused by Beijing's zero-Covid policy, wealthy entrepreneurs' search for a safe haven and the appeal of living and working in Singapore has led to a large influx of Chinese capital. "A stable political environment and currency gives people a sense of being fully protected," said Derrick Tan, chairman and chief executive of WRISE Wealth Management in Singapore.

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Chinese money has already made its presence felt in the city's residential property market. According to data from OrangeTee & Tie, Chinese buyers - both foreign nationals and those with permanent residency - were the top foreign purchasers of non-landed properties last year, as well as the leading overseas buyers of luxury homes in prime districts.

While accounting for a relatively small proportion of total sales, Chinese buying activity contributed to the steep rise in Singapore's private property prices and rents last year, defying the global downturn. Yet, there are bigger regional and global forces at work.

A geographical diversification of the world's wealth away from the US and Europe and towards Asia is gaining momentum. In a report published last June, Boston Consulting Group noted that Asia, excluding Japan, is enjoying the fastest rates of wealth accumulation and could account for a quarter of the world's wealth by 2026.

Most of Asia's family offices were established after the 2008 financial crash, with a new generation of well-educated entrepreneurs - particularly from emerging economies such as China, India and Indonesia - shifting their focus from running family businesses to controlling investment vehicles. Some of these entrepreneurs have made a killing in technology and commodities in the past several years and are seeking to grow their families' wealth by investing in alternative assets to bonds and stocks.

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Property is the preferred alternative to fixed income, the findings of a global family office report published by UBS last June revealed. "Real estate offers private investors the opportunity to deploy capital at scale. There are quality assets that are now available at a discount," said Kian-Jin Khoo, head of private wealth, Asia-Pacific, at JLL.

Moreover, wealthy private investors have an edge over their institutional counterparts in certain areas. Although institutional capital accounts for the bulk of commercial property transactions, family offices and ultra-high-net-worth buyers are not as constrained by rates of return because of their long-term investment horizons.

The motivations and preferences of private investors differ from those of institutional buyers. Focused on legacy planning and institutionalising their investment portfolios, private buyers are often willing to pay a premium for prestigious assets - particularly hotels, offices and high-end residential properties - that can be held for future generations.

People walk past shophouses on Haji Lane in the Arab Street area of Singapore. With their terracotta roof tiles, French-style timber windows and brightly coloured facades, these distinctive buildings are becoming a sought-after property asset for family offices, tycoons and real estate funds. Photo: Bloomberg

© Provided by South China Morning Post People walk past shophouses on Haji Lane in the Arab Street area of Singapore. With their terracotta roof tiles, French-style timber windows and brightly coloured facades, these distinctive buildings are becoming a sought-after property asset for family offices, tycoons and real estate funds. Photo: Bloomberg

Furthermore, the sharp rise in interest rates has given them an advantage over their institutional rivals who are more adversely affected by the increase in the cost of debt, making them more cautious. "The change in the interest rate environment has helped level the playing field," said John Howald, head of international capital, Asia-Pacific, at Colliers.

Yet, this does not mean that cash-rich private investors are undiscerning or hasty. If anything, Asian family offices and ultra-high-net-worth buyers are becoming more sophisticated and knowledgeable about global real estate. Not only are they purchasing resilient assets such as Japanese multifamily housing, they are teaming up with institutional capital to exploit opportunities further afield, notably in Britain's retail property market.

If the rising price of a Sentosa Golf Club membership is any guide, Asian private wealth is likely to become a more potent force in the region's real estate market in the coming years. Institutional buyers can expect the competition to intensify.

Nicholas Spiro is a partner at Lauressa Advisory