Earlier this year, leading international Estate agent Knight Frank, together with Citi Private Bank, published its 2012 edition of “The Wealth Report” and it’s a very worthwhile read. The report covers wealth creation, global spending habits of high net worth individuals, the prime property markets and the investment attitudes of the wealthy.
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 worldb 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.
Here are the main themes, and findings, of this latest Wealth Report:
GLOBAL WEALTH TRENDS
The global economy is expanding more slowly than in 2010, and the distribution of the worldb s super-rich is changing.
There are now 63,000 people worldwide with over US$100m in assets (source: Ledbury Research); the number of b centa-millionairesb is forecast to rise 37% over the next 4 years.
The Wealth Report 2012b s data shows a shift in wealth distribution towards the East: the region covering China, SE Asia and Japan now has more centa-millionaires than North America, and Western Europe.
CITIES OF THE FUTURE
According to The Wealth Report 2012b s Global Cities Study, established power players such as NYC and London retain their position at the top of the tables b but Beijing, Shanghai, Singapore and HK are rising up the ranks, listed as cities growing in importance most quickly to HNWIs and projected to be most important in 2050.
The most Important Global City currently is London, followed by New York. The city growing most rapidly in importance is Beijing.
China is also of interest in terms of its b secondaryb cities: forecasts show that by 2025, the country will have over 130 cities with one over one million inhabitants; these cities will be locations of local government and economic output, and will begin to matter on a global scale.
PRIME INTERNATIONAL RESIDENTIAL INDEX
Knight Frankb s “PRIME INTERNATIONAL RESIDENTIAL INDEX” has been a barometer of market activity since 2007; this year (2010-2011) the majority of locations covered showed flat or falling property prices, and some of the largest drops occurred in the areas with the strongest economic growth.
Property prices in Miami, London and Vancouver were underpinned by wealth flows from developing economies and events such as the Arab Spring and the Russian elections encouraged capital transfer.
Many Eurozone locations saw falls as a result of the continent-wide recession.
Asia-Pacific real estate markets have cooled b thanks in part to governmentsb increasing use of policy levers to control speculative purchasing activity and resultant price rises. However, there are still markets which are booming b Jakarta, for example b thanks to their economyb s steady economic growth, or their popularity with second-home purchasers.
The top of the PIRI table is held this year by Nairobi (price change of +25%), the Kenyan coast (+20%) and Miami (+19.1%).
Monaco still tops the table of price-per-square metre/foot, as the most expensive place to buy property: 1 m sq now costs $58,300 in the 4th quarter of 2011.
In 2011, US$70.6bn was invested in commercial property around the world (a rise from US$57.4bn in 2010). Knight Frank expects a further growth in interest from HNWIs, forecasting a US$74.1bn purchase volume in 2012 (a 5% increase from last year)
Private investors, including many from emerging economies, now see the sector as a long-term investment strategy; activity outside their own nationalities is becoming more and more common.
London is still the main secondary focus for many overseas commercial property investors: for buyers from SE Asia, similar legal structures and business practices smooth the way, and yields on prime locations compare favourably with their national counterparts.
Londonb s City offices and hotels are seeing high levels of global interest, as well as its high-end retail destinations, such as Bond Street.
INVESTMENT & WEALTH PLANNING
The wealthy are asking more questions than ever before about the risk profile of their portfolio and the security of its constituent parts; many investors have recently increased the allocation towards cash, or cash-like products: ease of potential exit is key.
Gold is still attractive, especially to Asian investors in a more uncertain economic climate.
High net worth individuals investment in property as an asset, grew in popularity by 19% in 2011.
The wealthy are increasingly looking to diversify into b investments of passionb , which still hold sentimental value even when their market worth may decrease.
The professional sports sector is attracting more interest, in particular from the North American rich b 24% more are investing in a sports team than in 2011.
Roman Abramovich and Sheikh Mansour (Chelsea FC, Manchester City FC) are the well-known billionaire big spenders, but in fact all but a few of the worldb s 50 most valuable sporting franchises (source: Forbes) are owned by wealthy individuals and families.
b 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 b