Wealth distribution

The Wealth Report 2020 (Page 18)

Ultra-wealthy population (those with net assets of US$30 million or more)

According to Knight Frank’s Wealth Report 2020, the number of ultra-wealthy people (US$30m+)* around the world is predicted to grow by 27% in the next five years to 2024, taking the population to just under 650,000.

Out of the top 20 fastest growing markets presented in the report, six are located in Asia – led by India (73% growth), five are in Europe – led by Sweden (47% growth) – and three are in Africa, led by Egypt (66% growth). Hong Kong sits in 171th position with predicted growth of 5% by 2024.

Liam Bailey, Global Head of Research at Knight Frank said, “Knight Frank predicts that by 2024, Asia will be the world’s second largest wealth hub outperforming Europe, with a forecast five-year growth of 44%.

The data, compiled for the first time by Knight Frank shows that over 31,000 additional UHNWIs were created globally in 2019, an increase of 6.4%. The number of UHNWIs created in Asia over the last year significantly outpaced that in Europe with an extra 11,788 UHNWIs created in the Asia region.

Liam Bailey continued: “It’s exciting to see how wealth is developing across Asia and, with the number of ultra-wealthy in India, Vietnam, Chinese Mainland and Malaysia outpacing many other markets over the next five years, it will be interesting to see how this impacts the global property market. With property accounting for a large proportion of total UHNWI wealth – almost a third, according to the Knight Frank Attitudes Survey – it will be fascinating to see where in the world the wealthy invest and into which asset classes.”  

*Knight Frank has invested in the creation of its own proprietary wealth-sizing model. For the first time, the firm can estimate the growth of wealth populations in over 200 countries globally in any wealth bracket. When talking about net wealth, Knight Frank now includes primary residences and second homes, as this gives a more accurate representation of total wealth.

Regional Wealth Distribution

Source: Knight Frank Research

Wealth distribution of ultra-wealthy (US$30m+) – Top 10 Markets

Source: Knight Frank Research

The Knight Frank City Wellbeing Index

Source: The Wealth Report 2020, Page 38

Knight Frank has released the results of its inaugural City Wellbeing Index, identifying the cities that are increasingly focused on the quality of life they are able to offer in order to attract entrepreneurs, skilled employees and encourage companies to grow and succeed. According to our Attitude Survey, 7 out of 10 wealth advisors across Asia and India said wellness factors are a key consideration when managing their client relations.

Our detailed analysis of 40 leading urban centres which takes into consideration a host of factors including – personal security, lifestyle, healthcare, crime, work-life balance and access to green spaces – reveals that European cities lead the City Wellbeing Index by some margin.

The Norwegian capital, Oslo takes the top spot of Knight Frank’s first City Wellbeing Index, followed by Zurich and Helsinki tied in second and Vienna in fourth – unsurprising given its decade at the top of the Mercer Quality of Life Index. Madrid rounds off the top five with Stockholm in sixth place.

Prime Residential Property

Prime International Residential Index (PIRI)

Source: The Wealth Report 2020, Page 46

This year, the PIRI tracks the movement of luxury residential prices in 100 cities and second home markets globally for the 12-months to the end of December 2019 reveals:

Overall PIRI performance:

European & Asian cities dominate the top 10 best performing locations. In Europe, Frankfurt leads the rankings (10.3%), following by Lisbon (9.6%), Athens (7.0%) and Berlin (6.5%). In Asia, Taipei ranks the top position (8.9%), followed by Seoul (7.6%), Manila (6.5%) and Guangzhou (6.3%).

• The 100 key locations covered by PIRI recorded average price rises of almost 2% – up from 1.3% in 2018. Across Asia Pacific region, 20 out of 23 markets recorded prices gains in 2019.
• Prices in Athens and Cyprus (4.3%) are now rising, but from a low base, with prime prices still around 35% below their 2008 peak.
• Hong Kong has raised from 47^th to 35^th  place in the index, recording 2.9% prices growth year-on-year.
• London registered a fall of 2.6% in 2019. However, the Conservatives' decisive victory in December's general election provided some much-needed political clarity and the market looks set to gain traction in 2020. 

Kate Everett-Allen, Head of International Residential Research at Knight Frank, said: “The results of our Prime International Residential Index reflect this slowdown. While growth ranged from double-digit hikes in some markets to significant falls in others, we saw a shift in the trend of moderating growth that has prevailed since 2013. In 2019, the 100 locations covered by PIRI recorded average price rises of almost 2% – up from 1.3% in 2018, but still some way off the 2.8% recorded in 2013.”

Affected by social unrest and the COVID-19 outbreak, the economy is being tested which will heavily impact wealth accumulation and purchasing power. We expect residential sales and property prices to fall in the coming months. It is estimated that the luxury residential prices in 2020 will fall by about 10%, while the super-luxury residential market remain relatively stable with a smaller decline. Fortunately, with the current owners' strong holding power and low interest rates, we do not expect residential property prices to drop drastically like the 1997 financial crisis or the SARS epidemic in 2003, said Thomas Lam, Executive Director, Head of Valuation & Advisory, Knight Frank.

Maggie Lee, Senior Director, Head of Residential Agency at Knight Frank said, The triple whammy of economic slowdown, social unrest and the coronavirus outbreak have forced many buyers to take a wait-and-see attitude. Nevertheless, we saw that in the past couple of months, the investment appetite of the high net-worth individuals (HNWIs) remained. This is consistent with historical trends, as the economy has little impact on the decision making process of HNWIs. The general lack of supply of super luxury units also smoothes out the curve. However, as poor market sentiment continues, the super prime sales volume in Hong Kong is expected to fall slightly, and demand will be softening. We foresee super prime prices to have minor adjustment in 2020.”

Mei Han Wong, Executive Director, Head of International Residential Sales at Knight Frank, said “We see a mixed picture in the market. Some buyers delay purchasing due to the coronavirus outbreak, while some buyers see this as an opportunity to fast track their investment decision. London has been one of the top investment destinations of Hong Kong investors in the past years, we have not seen Hong Kong buyers changing focus due to the coronavirus outbreak. 

Hong Kong’s luxury homes remain the second most expensive in the world

The Wealth Report 2020, page 52

Monaco – for the 13rd consecutive year – is confirmed as the most expensive city to buy luxury residential property, with US$1 million buying just 16.4 square metres of accommodation. Not far behind, Hong Kong, and London occupying second and third. US$1 million would buy 21.3 and 30.4 square metres, respectively. New York slipped to fourth place in 2019 although the gap between London and New York is small with currency shifts also proving influential.

Knight Frank Luxury Investment Index (KFLII)

The Wealth Report 2020, page 90

The Knight Frank Luxury Investment Index reveals that new entrant ‘Collectable Handbags’ has topped the  Index, rising in value by 13% over the 12 months to Q4 2019, knocking rare whisky off its number one position.

In the first index dedicated to tracking the burgeoning market for collectable handbags, Art Market Research (AMR), which supplies much of the data for the Knight Frank Luxury Investment Index, delves into the world of this emerging asset class. For KFLII, we focus specifically on collectable handbags made by Hermès and reveal that prices have more than doubled in value over a 10-year period (108% growth).

Sebastian Duthy, Director, Art Market Research said: “It’s only been possible to create an index on handbags now because of the frequency with which many iconic pieces are coming to auction today. Although bags made by other luxury brands like Chanel and Louis Vuitton are also highly collectable, it is those made by Hermès that attract the highest prices and are considered the most desirable.”

The index results show that on an annual basis handbags outperformed both whisky and art, which both recorded growth of 5%. Classic cars, another strong performer in recent years, slipped 7%. Overall, KFLII, which is a weighted average of each asset class, fell by 1%.

However, when we look at the results over a 10-year period, it is a different picture. Rare whisky continues to top the charts rising 564%, follow by cars (194%). KFLII rose by 141%. 

The results of The Wealth Report Attitudes Survey 2020 reveal that most UHNWIs are planning to retain or increase their allocations to luxury collectibles.

Andrew Shirley, Editor of The Wealth Report and the Knight Frank Luxury Investment Index said: “As with other investments of passion like rare whisky, whose value has risen sharply in recent years, handbags are increasingly being seen as an investment class in their own right, as well as highly desirable fashion accessories. Collectors are prepared to spend hundreds of thousands of dollars on the rarest or most desirable bags.”

Knight Frank Luxury Investment Index (to Q4 2019)

Source: Compiled by Knight Frank Research using data from Art Market Research (art, coins, furniture, handbags, jewellery, stamps and watches), Fancy Colour Research Foundation (coloured diamonds), HAGI (cars), Rare Whisky 101 and Wine Owners. *All data to Q4 2019 except stamps (Q4 2018)

Investments of Passion (taken from The Wealth Report Attitudes Survey 2020)

How is the UHNWI’s investment allocation to collectables changing or likely to change in the near future?  

Source: The Wealth Report Attitudes Survey 2020

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http://www.knightfrank.com/wealthreport