Chinese super-rich to increase by 80 pct in next 10 years

The number of Chinese who own more than $30 million in assets will grow by 80 percent in the next decade, making Beijing and Shanghai two of the most popular locations for luxury property investment, according to a report released by Knight Frank LLP Monday.

In 2023, China will have 14,213 ultra-wealthy individuals, defined by Knight Frank as those who own more than $30 million in net assets excluding their main residence. That makes China 13th among all countries and regions in terms of multi-millionaires, the report said.

Chinese people's potential to amass a huge amount of wealth will make Shanghai the 5th and Beijing the 6th most important cities in the world's ultra-rich community in 2024, according to the report. In 2014, Shanghai ranked 6th and Beijing ranked 9th, it noted.

Hong Kong, which ranked No.4 in 2014, will rank as No.3 in 2024, Knight Frank said.

"The Chinese mainland will have a growing presence on the list. And Hong Kong will enjoy the advantage of being the unofficial bridge that connects the Chinese mainland and the rest of the world in the next decade," Thomas Lam, head of research and consultancy for Knight Frank in China, said at a press conference Monday.

The surge of China's ultra-wealthy population has made Beijing and Shanghai the key markets for high-end residential properties and pushed up home prices, the report said. The price of prime residential units in Beijing, for example, soared by 17 percent to reach $17,100 per square meter in 2013, compared with a modest 2.3 percent growth in 2012.

Nicolas Holt, Knight Frank's head of Asia-Pacific research, said that buyers of China's luxury homes, mostly in Beijing, Shanghai and Guangzhou, capital of South China's Guangdong Province, usually pay the majority of their new homes in cash.

"In such an equity-driven market, the demand and prices of high-end residential units will continue to grow," he said.

China's millionaires are not just eyeing domestic properties, Knight Frank said, as they started snapping up residential and commercial real estates overseas in 2013 for both their private use and as an investment.

According to Holt, China contributed 30 percent of Australia's and 13 percent of the US' inbound capital into their property development markets in 2013.

Last year, private conglomerate Fosun International bought the Chase Manhattan Plaza in New York City for $725 million, and State-owned Greenland Holding Group took a 70 percent stake in a $5 billion residential apartment project, Atlantic Yards project, in Brooklyn, New York.

"The economic meltdown in 2008 and 2009 dealt a hard blow to high-end residential and commercial properties in North America and the UK," said Lam. "While a buyer needs to pay 70,000 yuan to 80,000 yuan per square meter for prime office space in Beijing, he only has to pay 30,000 yuan to 40,000 for a similar property in the US or Europe. That motivates multi-millionaires to buy abroad."

The Chinese rich, however, are challenged by the lack of understanding of local market and laws, said Michelle Zhang, head of Knight Frank's China desk.

"A buyer cannot buy a piece of land or property simply because you have a good relationship with the local government in the mature market in the UK," said Zhang, who is based in London. "That's why finding a local partner is necessary."

Both Holt and Zhang said that many Chinese rich are purchasing properties in second-tier cities, such as Birmingham, the UK's second largest city in terms of population, and Houston, the largest city in Texas, US. That is because the price is lower and transportation leading to first-tier cities is convenient, Zhang said.