Andrew Shirley, editor of The Wealth Report, shares the key insights from the 2012 edition launched today by Knight Frank and Citi Private Bank
The 2012 edition of The Wealth Report highlights the increasing influence of global wealth flows on prime property and investment markets. The newly wealthy from the world’s fastest-growing emerging economies rate stability, business transparency and education systems as the most important factors in a global city; prices of luxury housing in locations with this magic formula have been underpinned by their interest.
In Europe, despite the past year’s continental recession, the main luxury market hotspots have remained relatively hot – eight out of 10 top locations in the Knight Frank Prime International Residential Index (PIRI) price rankings are in the UK, France or Switzerland.
Prime property is a key part of portfolios – 2011 saw a global increase in allocation to real estate of 19%; the largest climbers in 2011 popularity for investment were bonds (+ 65%) and cash (+ 60%).
According to the report’s unique Attitudes Survey*, lifestyle and investment remain the key drivers for luxury second-home purchases, with 16% of all HNWIs surveyed already owning a ski chalet, and 40% a beachfront property. The US and UK are the top second-home destinations for the rich.
“ Lifestyle & investment remain the key drivers for luxury second-home purchases. 16% of all HNWIs surveyed already own a ski chalet & 40% a beachfront property ”
Conducting the report…
For our Attitudes Survey we surveyed a selection of Citi Private Bank’s client advisors around the globe. We asked them about the attitudes of their clients (worth on average over $100m each) towards, investments, their wealth, property and other trends such as philanthropy.
We also used exclusive data from Ledbury Research to predict the changes in the distribution of the world’s richest people. And, of course, we used Knight Frank’s own unique research into the world’s leading prime residential and commercial property markets.
Un-surprisingly we confirmed…
That the world’s richest people seem to be surviving the global economic downturn better than most people, and that property continues to be the investment of choice for many of them. London, New York, Hong Kong and Paris are seen as the most important world cities for high-net-worth individuals (HNWIs).
In China, Beijing and Shanghai are the cities with the most rapid growth in importance to HNWIs. Whereas HNWIs from the Middle East and Africa rate Dubai as the location with the most rapid growth in importance, with HNWIs from Latin America rating Miami and Sao Paolo as strong contenders for future influence
The Wealth Report 2012 confirms the relentless shift in wealth distribution towards Asia-Pacific: the region covering China, SE Asia and Japan now has more centa-millionaires (those with over US$100m in assets) than North America or Western Europe.
“ Tax is far less of an influencing factor on where HNWIs want to live than many people think. Stable transparent governance & education are considered far more important ”
Most surprisingly we found…
When asked what makes a global city, the top-scoring indicators were personal safety and security, economic openness and social stability, which is perhaps unsurprising given recent geopolitical turmoil around the globe, and goes some way to explaining London’s impressive performance.
Tax is far less of an influencing factor on where HNWIs want to live than many people think. Stable and transparent governance and education are considered far more important. That explains why property prices in London continue to rise, while those in popular low-tax jurisdictions such as Monaco are not performing as well.
Although the increasing influence of developing-market wealth will continue to drive global capital flows, the story is not just about China. India’s GDP is forecast to overtake China’s soon after 2050. It was also interesting that China’s second tier of cities, despite recording huge economic growth, are not yet considered to be of real global importance by HNWIs.
Since the last study…
There has been even more of a focus on safe-haven locations such as London by residential and commercial property investors.
Also, the wealth planning landscape and the attitudes of the wealthy have changed significantly in the past five years and are poised for even greater changes. We also estimate that by 2020 we will have seen the largest generational transfer of wealth ever, at least USD5 trillion will be passed to the next generation.
Changing markets and regulations, changing needs of beneficiaries require a careful, but flexible approach to the generational transfer of wealth. The transition of wealth that will occur over the next decade will involve greater sums and more multijurisdictional based beneficiaries than ever before.
“ By 2020 we will have seen the largest generational transfer of wealth ever, at least USD5 trillion will be passed to the next generation ”
Looking to the Future
We expect to see HNWI investors taking a less cautious, although still measured, approach to asset class selection.
The dramatic economic growth in much of Asia has provided a platform for widespread entrepreneurial success across the region. This is likely to be further enhanced as financial markets develop allowing much greater access to capital and financing. The creation of wealth resulting from these trends is likely to continue to drive growth in the number of HNWIs in Asia.
If readers remember only one thing it should be…
That economic growth alone is not sufficient to make a city truly globally important.
Luxury Society is pleased to share Knight Frank’s full Wealth Report with our readers. Please visit thewealthreport.net to download.
For more information regarding the research, please contact Knight Frank’s Press Department via email: Rosie.Cade@knightfrank.com.
