Wealth report: Where the rich go to find the best pickings

Wealth report: Where the rich go to find the best pickings

Mar 19,2024
A total of $483 billion (€443.5 billion) is waiting to be invested in 2024 across the globe. What's the smart money on?
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Last year saw the creation of an average of 70 very wealthy investors every day and this is a trend that shows no sign of slowing down.

The world's ultra-wealthy population rose by 4.2% and the number is expected to climb 28% during the five years to 2028, according to real estate consultancy firm Knight Frank.

Their latest Wealth report found that the number of ultra-high-net-worth individuals or UHNWIs - someone with a net worth of $30 million (€27.6 million) - or more across the globe swelled to 626,619, from 601,300 a year earlier. This was due to increased investment in shares on the hopes of a lowering of interest rates, which in turn led to a rise in the value of equity markets. The robust performance of the US economy also helped the rich get richer. 

Growth was led by North America where the number of ultra-wealthy is up 7.2% in a year, followed by the Middle East (6.2%). 

Europe lagged in terms of new wealth generation (the number of super-rich is up by 1.8%), but the "continent remains home to the wealthiest 1%", wrote Liam Bailey, Knight Frank's Global Head of Research in the report. 

Only Latin America saw its number of wealthy individuals fall, down by 3.6%.

The growth in 2023 follows a year when the total wealth of the richest fell by a staggering $10 trillion (€9.18 trillion) as energy, economic and geopolitical shocks followed one another.

"This year, we confirm a rise in the number of UHNWIs globally, led by growth in the US and the Middle East, and continued demand from these investors for real estate," wrote Bailey, adding that "the need for capital in the property sector has never been higher."

How much do you need to join the club?

It depends on what country we are talking about, but generally, belonging to the 1% richest is easier than becoming an ultra-high-net-worth individual, sitting on $30 million. Even in Monaco, the necessary minimum net worth is less than half.

What are the wealthiest people investing in this year?

A total of $483 billion (€443.5 billion) is waiting to be invested this year, amid a backdrop of a slowing global economy, the report suggested, forecasting that global GDP will be around 2.9% in 2024, down from 3.1% a year earlier. 

On the back of the continuing fragmentation of US-China relations, there is an expected growth in Investment in strategic sectors such as technology, energy and defence, forecasts the report. 

Additionally, 2024 could be the year for the property market to recover after high-interest rates left their imprint upon them last year, with the residential market less hard hit than commercial real estate (CRE), according to the report.

More than a fifth of global UHNWIs are planning to buy residential property in 2024.

For the world's wealthiest, prime properties (the most expensive ones in a given location, generally defined as the top 5% of each market by value) are at the focus. The report noted that, despite high global interest rates and sales volumes taking a hit in 2023, the value of these prime properties continued to grow by 3.1% across the world.

Also almost one-fifth of the richest consider commercial real estate investment, even though it had a disastrous year in 2023, seeing investment volumes falling by almost half due to high higher debt costs. 

According to Knight Frank, Middle Eastern and Asian investors are expected to have the most appetite to buy commercial real estate. 

"Lower values, lower interest rates and some forced selling will allow for a much anticipated improvement in investment volumes," noted the report.

AI and climate change in the real estate investments

The report expects approximately 40% of corporate IT expenditure to be directed towards AI-related projects by next year with certain types of commercial property types possibly benefiting from the shift.

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A sizeable increase in demand for data centres, especially close to cost-effective energy sources is highly expected. Specialised office spaces for research will also be in demand, situated near universities or established technology hubs.

Moreover, AI-driven building management, including energy efficiency, climate control and security will be the buzzwords in the top-tier office market. 

According to the report, sustainability is increasingly at the focus of the wealthiest of the world, with almost two-thirds of UHNWIs attempting to reduce their carbon footprint and putting sustainability as a key consideration in their CRE investment.

Climate change is increasingly impacting the property market, from altered crop yields in agricultural regions, shifts in tourism patterns, damaged properties and disruptions in infrastructure.

In the short term, an increasing number of properties are facing climbing insurance premiums, or even being turned down entirely by insurance companies.

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Meanwhile, there is a tangible increase in the demands from both tenants and investors for properties situated in low-risk areas, as well as for energy-efficient buildings. There is expected to be a heightened demand for technology that assists property owners in preparing for, adapting to and recovering from climate-related hazards and subsequent damage.

Luxury collectibles are shining less bright

Despite record-breaking individual sales in 2023, the report found that particular assets are falling in the luxury market, such as rare whisky (-9%), classic cars (-6%), handbags (-4%) and furniture (-2%). 

While art, jewellery and watches are still on the rise, the report expects that this market will see significant volatility. 

What is in store for the world's wealthiest in the next years?

"We expect the number of wealthy individuals globally to rise by 28.1% during the five years to 2028," stated the report, adding that it is below the 44% increase experienced in the five years to 2023.

The following years' growth will be driven from Asia, overwhelmingly from India and the Chinese mainland.

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More than two-thirds of the wealthiest (UHNWIs) globally anticipate growth in their wealth this year, with younger people showing more confidence.

Women's share of the wealthiest has been climbing, making up, in 2023, around 11% of global UHNWIs. This could climb further as, among Gen Z with a net worth of $1 million (€920 million) or more (high-net-worth individuals), a remarkable 81% of women are expecting growth over the next years and half of them expect "significant growth".

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