Not only is the gap between the world’s wealthy and the poor widening significantly, fewer people own more of the global assets than ever before, and the trend is predicted to continue for the next decade. These are just some of the highlights the newest reports outline, and the findings are significant indeed.
Most significant is the finding that the global population of Ultra High Net Worth Individuals declined by 3% in 2015, according to Knight Frank’s Annual Wealth Report 2016. This contradicts the widely held hopes that the global economy was solid despite the symptomatic market adjustments that affect overall progress.
Between 2014 and 2015, a slump in many global equity and commodity markets led to an actual drop in the number of UHNWIs around the world. Though the strength of the U.S. dollar had quite a lot to do with it, as currency fluctuations contributed to individuals slipping into lower wealth brackets when measured in US.
As explained by Knight Frank, “only two major currencies strengthened against the US dollar in 2015 – the Japanese yen and the Israeli shekel. All other major currencies depreciated, some considerably.”
Never fear, there are still approximately 187,500 ultra high net worth individuals (UHNWI) who each boast more than $30 million in net investable assets, excluding their principal residence.This select group of people collectively control $19.3 trillion, giving them each an average net worth of roughly $100 million.
“ 187,500 ultra high net worth individuals globally control $19.3 trillion ”
This population is expected to grow by 41% in the coming decade, totalling as many as 263,483 individuals by 2025.
The 2015 Wealth Report once again confirms North America as home to the largest population of UHNWI’s, predicting that this will remain unchanged for the next decade. That said population growth in North America will slow to 30% in 2025, as Asia’s UHNW population soars up to 66%, adding as many as 27,000 new UHNW individuals.
Despite the decline of the Russian Ruble and a continued growth slowdown in China, the ultra-wealthy population of these two countries is expected to grow by 72% and 75% respectively in the coming decade. UHNWI’s will grow by 105% in India, 129% in Mozambique and 140% in Vietnam, by 2025, yet the barriers to entry for luxury brands in these three regions will likely remain high.
What the 2016 report also confirms is that the ultra wealthy population is increasingly nomadic. In the case of Los Angeles, its multi-millionaire population – those with more than $10m in net investable assets – gyrates between a little over 11,000 to just under 6,000 through the year. Dubai, Cape Town, London and Miami also see significant volatility in their wealthy populations.
In August, as many as 2,200 multi-millionaires descend on Cannes to enjoy summer in the South of France. This population contracts to as few as 460 in the winter month of February – a population fluctuation of almost 400%. This is undoubtedly why luxury brands are rushing to seasonal destinations such as Porto Cervo, The Hamptons, Courcheval and the likes, to leverage the well-to-do foot traffic.
“ Los Angeles’ multi-millionaire population fluctuates between 6,000 & 11,000 throughout the year ”
Thanksgiving in America has also been identified as a key global event for the Private Jet sector. According to data from NetJets, as many as 5, 325 private flights were booked for the occasion, attracting British, Canadian and German visitors from outside the U.S. The Super Bowl was the second largest event for private jets, followed by Davos, the Kentucky Derby and the Monaco Grand Prix.
In terms of where they live, London and New York continue to be the most important cities in the world for UHNWIs. More ultra-wealthy individuals reside in New York than London (5,600 to 4,900), though this rank is heavily skewed when taking into account the population of UHNWIs living within a two hour commute.
Under this accounting, Paris rules the roost with 19,000 UHNWIs living within two hours of the city. Geneva trails slightly behind with 18,100, followed by London with 16,100. In North and South American cities, significant geographical distance prevents rapid connection between the ultra-wealthy, resulting in more isolated populations than in Europe and Asia.
Where findings become more homogenous, is where Knight Frank investigates what UHNWIs like to buy. Real estate is still largely considered a safe haven, as property prices continue to rise in most major markets. The world’s most expensive real estate can still be found in Monaco, Hong Kong, London, New York and Geneva respectively, as home prices in Canada and Australia continue to surge.
“ There are 19,000 UHNWIs living within two hours of Paris ”
Overall the wealthy are investing in classic cars – a passion investment category that grew by 17% – followed by coins (13%), fine wine & watches (5%) and art & jewellery (4%). Superyacht sales increased by 40%. A slew of stellar auction results throughout the year kept luxury investments firmly in the media spotlight, such as the $3.7m Marc Newson Lockheed Lounge sofa auctioned by Phillips in April.
A Hong Kong-based billionaire set an all-time record for a gem or piece of jewellery when he bid $48.4m for the Blue Moon, a rare fancy vivid blue diamond auctioned by Sotheby’s Geneva in November. The day before, he paid $28.5m for a vivid pink diamond sold by Christie’s.
Overall it is increasingly clear that UHNWIs are ready to spend, but they are looking for truly exceptional products. And, becoming a smaller consumer segment, their more discriminatory and dwindling disposable income is being sought ever more feverishly by a growing list of providers, adding fuel to the consumer chaos.