Every year, the Knight Frank Wealth Report brings together data and insight to highlight the issues that matter most to the world’s wealthy. It’s a highly detailed and thoroughly researched document, one that’s well worth downloading.
But for those too busy to read a 49-page PDF, we’ve done the hard work for you, distilling their findings into four key headlines.
1. The number of UHNWIs continues to grow
Defined as someone with investable assets of over US$30 million, the number of ultra-high net-worth individuals (UHNWIs) is set to grow by 22% by the end of 2023.
Whilst this shows growth, this figure makes a downturn from the 10% rise in UHNWIs seen in 2017 alone.
2017 was a great year for equity, real estate and luxury markets, explaining the spike. But the more modest YoY growth predicted in the next five years suggests a more uncertain economic future, with moderate global growth, and even potential downturns, predicted.
That said, the number of high net-worth individuals – those with over US$1 million – will breach the 20-million mark in 2019. Oliver Williams, Head of GlobalData WealthInsight, makes the link between entrepreneurship and wealth creation. “The easier it is to create a business, the more wealth entrepreneurs there will be,” he explained.
He also name-checked the importance of property: “Growth in non-financial assets – that is, real estate – is one of the leading factors driving UHNWI growth.”
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2. London tops the world’s cities
The Knight Frank City Wealth Index calculates how cities rank in terms of wealth, investment potential and lifestyle. This year, the results show that London has climbed back to the top of the tree, despite Brexit concerns, knocking New York into second place.
When it comes to wealth, London has the highest number of UHNWIs in the world, with nearly 5,000 – up 582 in the past five years. Although when it comes to billionaires, New York takes that crown, being home to 94 of them.
With regards to investment, Knight Frank work this out by assessing data on large property investments worth US$10 million or more by private entities across both residential and commercial markets. The results show a North American dominance, with New York (1st), Los Angeles (3rd equal) and Washington DC (5th) making up the top five.
For lifestyle rankings, Knight Frank used criteria such as education, security and the prevalence of luxury indicators, such as five-star hotels and concentration of high-end restaurants. London leads the way here, much in part due to its 76 five-star hotels and the number of excellent universities.
3. Luxury property markets are growing but slowing
The Knight Frank Prime International Residential Index (PIRI) tracks the value of luxury residential markets across the world’s biggest 100 cities. In 2018, the PIRI increased on average by 1.3%, down from 2017’s 2.1% and the lowest figure since 2012. Further, in 2017, 11 cities achieved double-digit growth; in 2018 that figure fell to just 5.
This slow-down comes as little surprise in the face of rising interest rates, which are still historically low but are starting to rise from the hyper-low figures necessitated by 2008’s recession. Traditional real estate powerhouses, such as London and New York, entered negative territory, whilst Chinese cities also slid down the charts.
Despite this, nearly three-quarters of PIRI cities registered growth, with European cities performing strongly, along with some key Latin American capitals, such as Buenos Aires and Mexico City.
The best-performing city was Manila, the Philippines capital, which grew by 11%. But even here there is a note of regression, as 11% marks the lowest top-performing PIRI city since Knight Frank created the index in 2008.
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4. 2019 will see a slowdown for the luxury property market
In the face of economic uncertainty, rising interest rates and greater market regulation, global property markets are likely to cool in 2019. Which means it’s even more important for property developers to understand how they can use marketing to stand out from their competitors.
According to the Wealth Report, bigger European cities like Paris, Berlin and Madrid will experience growth above 5%, fuelled by strong tenant demand and the promise of aspirational, inviting lifestyles.
On the flip side, Far Eastern markets such as Singapore and Hong Kong will struggle as stronger tax and regulation policies will see buyers adjust their spending. This will be compounded by interest rate rises in the US, adding pressure to this dollar-tied market.
Whilst in Britain, the uncertain impact of Brexit will keep prices cool for a time before the strong demand for housing sees the market pick up again. Knight Frank predict that London will experience a 1% growth in sales but admit this might be pessimistic.
The past five years have seen impressive growth for HNWIs and UHNWIs but 2019 marks a period of greater uncertainty and potential economic slowdown over the coming years.
The effects of tighter tax controls and rising interest rates are likely to encourage different spending habits amongst the world’s wealthy, and luxury brands who rely on U/HWNIs’ business should cater for this in their sales and marketing plans. They will need to understand how their clients’ habits might change and then position themselves as the solution to these changes.
Working with some of the world’s most prestigious brands, including luxury yacht manufacturers Princess Yachts, Woven are perfectly placed to help luxury brands plan and execute long-term marketing strategies. Get in touch with our award-winning strategists today to see how we can help you – through good economic times and bad.