The rich are getting richer and there will soon be far more of them, latest research shows.
Figures released ahead of the publication next week of property consultant Knight Frank’s latest Wealth Report show that the global population of ultra-high-net-worth individuals (UHNWIs) - those with assets of more than $30m (£21.2m) – rose by 2.4% last year to 520,000.
And their ranks are expected to swell by 27% over the next five years, while the number of dollar millionaires is predicted to increase by 41% in the same period.
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Here we pick out some of the other key findings from the report, including how the ultra-rich are spending their stacks of cash.
1. Eastern promise
Asia is expected to see the largest rise in the number of UHNWIs, with an overall increase of 39% across the continent by 2025, led by Indonesia (67%) and India (63%). But researchers believe that Europe “will retain its crown as the second largest wealth hub”, says financial news site International Investment, with expected growth of 23%. The biggest rises in Europe are forecast in Poland (61%) and Sweden (59%).
Knight Frank global head of research Liam Bailey said: “Asia is the key wealth story. The US is, and will remain, the world’s dominant wealth hub over our forecast period, but Asia will see the fastest growth in UHNWIs over the next five years - 39% compared to the 27% global average.
“By 2025, Asia will host 24% of all UHNWIs, up from 17% a decade earlier. The region is already home to more billionaires than any other (36% of the global total). China is the key to this phenomenon, with 246% forecast growth in very wealthy residents in the decade to 2025.”
2. A toast to luxury collectables
Hermés handbags have topped the Knight Frank Luxury Investment Index for the second year in a row, followed by fine wine. The average price of the French fashion house’s bags rose by 17% in 2020, while wine saw a 13% incremental value on investment.
According to Reuters, Wealth Report editor Andrew Shirley says that last year’s most expensive Birkin sold for $200,000, with Asian luxury collectors in Asia “very happy to bid on handbags online”.
Shirley continued: “The market for luxury collectables, which relies on the auction market for much of its profile, is clearly badly affected by the Covid-19 pandemic. But some sectors like handbags are weathering the storm better than higher-value assets like the top end of the art market, where no painting sold for more than $100m (£70.6m) for the first time in a number of years.”
3. ‘Long live the city’
London and New York are the most preferred cities among UHNWIs to do business, live and invest, tying in joint first as the overall leaders across the three categories in Knight Frank’s City Wealth Index.
Paris follows at No. 3, and European cities are the overall leaders of the index this year, claiming eight of the top 20 spots. Asia claims five of the top 20 positions, with Tokyo at No. 4 and Hong Kong at No. 5, while seven cities in North America get a mention.
“Long live the city,” said Frank Knight research boss Bailey. “History shows us that cities rise, fall, but always rise again. The pandemic, far from undermining the city, has shown up the potential for rebirth - expect to hear a lot more about the 15-minute city, green cities, place-making and the coming redevelopment boom.
“No wonder development land is the third most popular pick for property investment this year for UHNWIs.”
4. Lots of loot in London
The US dominates in the index’s wealth category, which measures the number of UHNWI and high-net-worth individuals’ (HNWIs) dwellers in a city. New York takes the top spot globally, with 7,743 individuals with a net worth of $30m (£21.1m) or more.
But while the Big Apple is home to more of the ultra-rich, London leads in terms of the total number of HNWI dwellers, with more than 870,000 millionaires.
London also claims top spot for the largest number of “prime” homes in each city, with more than 68,000 properties worth £2m or more. Dubai is in second place (42,356 homes), with Sydney (27,436 homes) coming third.
5. Location, location, location
According to the wealth report, 26% of UHNWIs worldwide are planning to buy a new home in 2021 - up from 21% in 2020. This increased demand is expected to help fuel price rises of up to 7% in key markets over the course of the year.
“Demand is especially strong for rural and coastal properties, with access to open space being the most highly desired feature,” said research chief Bailey. “The pandemic is super-charging demand for locations that offer a surfeit of wellness - think mountains, lakes, and coastal hot-spots. Demand will help fuel price rises of up to 7% for our key markets this year.”
Auckland leads Knight Frank’s Prime International Residential Index, with price rises of 18% in 2020. The surge in demand is attributed to New Zealand’s much-praised Covid-19 response and rapid economic recovery, along with ultra-low mortgage rates and a limited supply of available properties. Asian cities occupy the next three rankings in the index, with Shenzhen (+13%), Seoul (+12%) and Manila (+10%).
6. Banking on bricks and mortar
Private capital investors have shrugged off the pandemic to continue pumping cash into the commercial real-estate market. The volume of private capital invested globally last year was $232bn (£163.7m) - 9% above the ten-year average, albeit down on 2019 levels. And a Knight Frank attitudes survey reveals that a quarter of UHNWIs plan to invest in commercial real estate assets in 2021.
Alex James, the estate agent’s head of private client commercial advisory, said: “Commercial real estate provides investors with a relatively high yielding stable income return, the potential for capital value growth and diversification. These are all key drivers in preserving wealth for future generations and protecting against the impact of the global pandemic.
“While the pandemic has impacted the way we live, work and do business, there is renewed optimism in 2021 that as travel restrictions reduce and the rollout of the vaccination programs reaches advanced stages, private capital will look to increase its exposure in familiar markets and focus on sectors with strong long-term fundamentals.”
The US ($141.7bn/£100bn), Germany ($11.1bn/£7.84bn) and the UK ($10.6bn/£7.48bn) were the top three countries for private capital real estate investments in 2020.
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