Chris Liem, the owner and principal of Engel & Völkers Hong Kong, a firm specialising in real estate and the needs of ultra-high net worth clients, talks about the Asia-related market.

Editor’s note: The
following comments from from Chris
Liem, the owner and principal of Engel & Völkers Hong Kong, a firm specialising in real estate and the
needs of ultra-high net worth clients.

How often have you heard that
it’s all about understanding the client’s needs and motivations? Almost so much
that it starts to become cliché.  Unfortunately, the cliché is true.

What we at Engel & Völkers
understand about the ultra-high net worth client is the importance of this
mantra: it all comes down to determining the motivations of our clients to help
them invest. When we consider an UHNW individual, the preliminary stage is to
make sure the investment is the right size.

Offering a parcel of land worth
$20,000 which could double in value is quite irrelevant to our UHNW clients, as
the impact on their balance sheet is negligible. But [what about] a $100
million-property yielding 10 per cent in the centre of a major city with
capital gains? That is more appealing. Now, understanding an UHNW client’s
needs is ultimately important, but not excessively difficult; customising that
understanding is the real challenge.

Customisation in the luxury
market in general is about delivering something truly unique. It appeals to the
pleasure and security of owning something that no one else has; it projects a
certain exclusive image; it is an extension of someone’s personal and
professional brand.

Whether we are talking about a
Powder Blue Rolls Royce or an individually tailored suit from Ascot Chang, the
same sort of desirable customisation lends itself to luxury property. Property,
land, and title of course have a store of monetary value set by the market;
what makes them investments and not just residences for UHNW clients are the
emotional values of personal image, brand and legacy that are attached to the
property.

In a world of unlimited possibilities,
how do we help investors make the right choice? My advice to investors is
guided by their answer to questions that start with “Why?” Why are you
investing? Why that location? Why now? Their responses reveal what are the key
considerations – if health and environment are the most important, if comfort
is the most important, if image is the most important.

And for some clients, investing
in real estate is about investing in a secure future. Here, price becomes a
secondary motivation; knowing that the future of your family is secured is
worth any premium that may be attached.

Go Long

For serious investors, you must
look at long-term trends. When an asset or building becomes a distressed sale,
having the preparation and confidence to step in and acquire the asset is the
most important consideration for UHNW clients.

From an investment perspective,
looking at broader trends minimises the risk of property investment. For
example, while it may come as a surprise to some, Spain
is actually an attractive market because of its clearing prices and high
unemployment rate; when Spain
starts to recover, property values will benefit. In other parts of the world,
the US has moved off its
lows, and the favourable trading positions of Germany
and Hong Kong with China
give confidence to generating meaningful returns.

An investment thesis

One thing remains certain in
the face of price volatility and uncertain economic futures: aspirational homes
and unique offerings will always be in high demand. The luxury sector, largely
dominated by luxury real estate, is growing at 8 per cent per annum, faster
than the GDP growth of developed countries. 
This investment thesis presents many opportunities for UHNW clients to
not only establish long term gains, but to develop the right image and
long-standing legacy.

Understanding all the combinations of monetary, emotional
and aspirational factors is central to our beliefs about property investing for
ultra-high net worth clients and central to the value that we provide them.
Creating these possibilities for our UHNW clients and helping them understand what
the value of each property means to them individually is timeless, and it all
comes down to the basics: understanding their needs.