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The Rationale for Using Ownership Structures by UHNW Investors
Most high-net-worth individuals do not approach international property acquisitions in an ad-hoc fashion. Their property acquisitions are usually part of a larger wealth management plan that includes considerations surrounding legal, tax and succession issues.
The following are examples of common reasons why UHNW investors use ownership structures:
- Asset protection against legal or financial risks
- Tax minimisation across multiple jurisdictions
- Estate planning and wealth transfer
- Privacy and confidentiality
- Simplified cross-border management of investments
Singapore & Dubai real estate for UHNW are leading global financial centres, many investors use real estate acquisition to combine a residency strategy with a wealth diversification strategy.
Property Ownership Structures Used by UHNW Investors in Singapore Ultra Prime Real Estate
The real estate market in Singapore is strictly regulated with a strong government emphasis on ensuring citizens can afford to buy or rent homes, so if you are a foreign investor, there are restrictions on what you can do. Even with these restrictions in place, UHNW investors continue to invest in Singapore ultra prime real estate and commercial real estate.
- Personal Ownership
- Trust Structures
- Own real estate on behalf of several family members
- Plan for the long-term transfer of wealth between family members
- Protect their wealth from future generations
- Corporate Ownership
- Own multiple international assets
- Operate through family offices
- Manage global investment portfolios
Some UHNW investors purchase property by putting it into their personal name but this method is less popular among UHNW clients because of issues related to taxation and estate planning.
Singapore property investment for foreigners are subject to the Additional Buyer’s Stamp Duty (ABSD) which adds a significant cost to the price of acquiring residential real estate.
Another way of investing in real estate to accomplish the same objectives as above is to use trust structures.
Trusts provide the opportunity for UHNW individuals to:
Trust structures in Singapore must remain compliant with local regulatory frameworks, but are still an effective way of planning for succession purposes and protecting family wealth.
These taxes cause many UHNW investors to consider different methods of owning their properties.
Some UHNW investors hold property through private investment companies or holding companies.
This approach is often used when investors:
Structuring Property Ownership of UHNW Investors in Dubai
Dubai is an attractive luxury luxury real estate investment market worldwide, with advantages over Singapore in terms of flexibility of ownership by foreign nationals.
Dubai luxury property market has freehold zones designated by the government (areas where foreign ownership of real estate is permitted), giving you many different options for owning a property in Dubai.
Option 1: Personal Freehold Ownership
Individuals from all over the world buy properties in Dubai freehold areas (Ex: The Palm Jumeirah) in their name.
The benefits of freehold ownership include:
- Full ownership of the property (i.e. you have complete ownership and can buy, sell, lease or transfer your property).
- There are no annual property tax in Dubai.
The easy-to-understand ownership laws in Dubai have made it a very popular place for investment in luxury real estate.
Option 2: Ownership through an Offshore Company
Many ultra high net worth real estate investment use an offshore company, which is a business entity registered in a foreign country, to buy real estate in Dubai.
You can also set up an offshore company in locations connected with the UAE and/or in international financing centres.There are many advantages to offshore ownership, including:
- Privacy
- Asset Protection
- Simplified Global Wealth Structuring
Corporate ownership of large portfolios that span multiple countries is very common among UHNW individuals.
Holding Companies and Family Offices
Many ultra-wealthy families manage their global real estate investment through family offices or holding companies.
Dubai has become an increasingly popular location for family offices because of its:
- Investor-friendly regulations
- Global connectivity
- Strategic geographic location between Europe, Asia, and Africa
These structures help UHNW investors manage luxury real estate assets alongside other investments such as private equity, global equities, and alternative assets.
Comparison of property ownership in Dubai and Singapore
Both Dubai and Singapore luxury real estate investment attract large sums of money from around the world. The type of investment in those markets is very different.
In Singapore:
- Residential property is highly regulated
- Higher taxes (stamp duties) imposed on foreign buyers
- Significant focus on the preservation and stability of wealth
In Dubai:
- International investors can own property in a ‘more open’ manner
- There is no annual property tax
- There are flexible ownership structures and residency options
The differences between the two markets mean that investors typically select the one that supports their long-term wealth objective and their global lifestyle.
Why do UHNW investors continue to invest in Singapore and Dubai?
Both cities have strong fundamentals that make them attractive to global investors, including:
- Economic and political stability
- Strong rule of law and respect for property rights
- Demand for luxury real estate
- Global connectivity and an attractive lifestyle.
For many UHNW people, acquiring real estate in Singapore or Dubai is not merely about buying a house for themselves; rather, they are developing a portfolio of diversified assets on a global basis, which provides the opportunity for mobility, security and long-term legacy planning purposes.
Conclusion
Understanding how UHNW investors structure ownership of property in Singapore and Dubai luxury real estate investment gives an overview of how the world’s very wealthy individuals use various investment strategies to manage their investments. These investors do not merely purchase property on a whim; rather, they utilize professionally drafted legal and financial structures to maintain and manage their assets.
